Investors ploughed less money into emerging-market assets in the final week of this month as US midterm elections and the US Federal Reserve policy meeting approach, prompting managers to hold more cash.
Emerging-market equity funds took in US$2.68 billion in the week ended Wednesday, while bond funds attracted US$710 million, Cambridge, Massachusetts-based EPFR Global said in an e-mailed statement yesterday. The amounts were about half the totals absorbed in the preceding week. About US$20.2 billion went into “cash proxy” money-market funds, the most in 14 weeks and the third-largest weekly intake this year, it said.
Speculation that a second round of easing might proceed at a slower pace contributed to “the sense of drift to the sidelines” in fund flows, according to EPFR, which tracks US$13 trillion of assets. Those concerns may limit the US dollar’s slide and also blunted appetites for commodity funds, it said.
The US will hold congressional elections on Tuesday in a season dominated by voter concerns about the economy as the jobless rate of 9.6 percent held near the highest since 1983. The world’s biggest economy grew at an annual pace of 2 percent in the third quarter, stoking speculation the Fed will unveil a second round of bond purchases on Wednesday to secure a stronger recovery.
Inflows into emerging-market stock funds have surpassed US$60 billion and exceeded US$46 billion in bond funds, both poised for their best year since EPFR started tracking them in 1995. Investors are sending more capital into higher-yielding assets in developing nations as monetary easing kept interest rates in the US, Japan and Europe near record lows.
In the report, EPFR said equity funds dedicated to Brazil, Russia, India and China absorbed US$30 million for the week while inflows into commodity sector funds were less than a quarter of the US$1 billion recorded in the preceding week.
Investors pulled US$108 million from Japan equity funds amid signs export-driven recovery is tailing off in that nation, EPFR said.
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