Asia sucks up fund flows amid global risks-EPFR

Published 09/24/2010, 02:39 AM
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* Big inflows into Asia ex-Japan equity funds

* China, India lead charge into these funds

* Europe stock funds see outflows of $1 bln in week

* Emerging market local bonds are hot

HONG KONG, Sept 24 (Reuters) - Investors made a beeline to Asian equities and emerging market bonds in the latest week, sidestepping risks associated with Europe's finances and anticipating the Federal Reserve will provide even more cheap liquidity, EPFR Global said on Friday.

"Asia's combination of strong regional growth and the generally good fiscal profiles of key markets saw funds investing in that region fare particularly well," the fund tracker said in a note.

Asia ex-Japan equity funds had their best week of inflows in more than 15 months for the week ended Sept 22, Japan equity funds snapped a 12-week run of outflows and Pacific equity funds extended a string of weekly inflows to the longest since the second quarter of 2010.

Equity funds around the world tracked by the fund research firm saw an aggregate $3.3 billion of net inflows, while bond funds took in $4.8 billion and money market funds had small inflows of $45 million.

The Federal Reserve on Tuesday took a step closer to printing more money to support the U.S. economy, a move that knocked the U.S. dollar, lifted gold and made some investors expect that even more cheaply borrowed money is going to be chasing few quality assets.

EMERGING MARKET EQUITY FUNDS

The fund group had more than $1 billion in inflows in the latest week, bringing year-to-date inflows to about $45 billion.

The heavy flows into Asia ex-Japan were mainly driven by interest in India and China.

New money heading to India equity funds reached their highest level in nearly three years while China equity funds had their best week in over four months.

Latin America-focused funds were also popular. The fund type has had inflows for the last six weeks, with higher than average flows into Chile, Colombia and Peru equity funds.

Europe, Middle East & Africa regional funds saw a six-week high of inflows at $110 million.

DEVELOPED MARKET EQUITY FUNDS

Europe equity funds were stung in the latest week by disappointing economic data out of Ireland and fears about the European banking system. Outflows from the fund group hit an 18-week high of $1.05 billion.

Flows into U.S. equity funds, which surrendered an 18-month high of $23.7 billion during August, were positive. Outflows from actively managed funds were more than offset by flows into exchange traded funds and other passive vehicles.

SECTOR FUNDS

Commodity-sector funds benefited from surging gold prices, with inflows hitting a 15-week high.

The financial sector had small inflows, while energy sector funds had $303 million leave the door.

BOND FUNDS

Emerging market local currency bond funds continued to benefit from a clear increase in allocation among investors.

Of the $1.05 billion that flowed into emerging market bond funds in the latest week, bringing their inflow streak to 17 weeks, $683 million went into funds focused on investing in local currency bonds.

Global bond funds took in $1.65 billion during the week, bringing year-to-date inflows to $50.9 billion, despite their relatively high average exposure to European sovereign debt.

U.S. bond funds took in fresh money for the 13th consecutive week, with investors showing a clear preference for short-term bond funds, both government and corporate. They steered clear of long-term government bond funds, while moving about $415 million into broad intermediate term funds. (Reporting by Kevin Plumberg; Editing by Neil Fullick)

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