GLOBAL - Institutional investors are ploughing into emerging market bonds, according to EmergingPortfolio.com Fund Research (EPFR). The asset class attracted net inflows of US$198m for the week-ending April 16, meaning a near 17% rise in total assets this year. Total inflows through the first three-and-a-half months of 2003 are now more than double the net inflows for the whole of 2002.
EPFR tracked 168 emerging market bond funds with US$10.5bn in assets.
“About US$139m of the new flows were pumped into a single fund, which usually indicates the awarding of a new emerging markets debt mandate by a pension fund or other capital source,” said Brad Durham, a managing director of EPFR.
“Driving the sentiment is investor search for yield globally, the awareness that money flows into emerging market bonds is at historic highs, and positive country specific developments like the remarkable pace being set by the Brazilian government in pressing on with pension and tax reform that will help the country service its enormous short-term debt load.”
Emerging market equity funds also saw the return of some investor interest, drawing in US$122m in net inflows and reducing total outflows for the year to US$389.2m.
According to EPFR, Latin America is the most favoured region. After heavy outflows from Asia (ex-Japan) equity funds in recent weeks, perhaps due to the severity of the SARS crisis, the region recorded a modest inflow of US$10.6m. As sentiment towards Russia slackened due to the downward pressure on oil prices, flows have now ebbed from emerging Europe regional equity funds for two consecutive weeks.
Investors withdrew US$14.4m in the most recent week after a US$28.2m net loss of funds the week before.
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