GLOBAL - Fund managers are showing a strong appetite for emerging Asian equities, with China, Hong Kong and India attracting significant inflows during the first two months of the year.
The interest could signal a turning point for emerging market equities which have recently suffered outflows as investors sought the relative ‘safety’ of emerging market debt.
Data from US-headquartered EmergingPortfolio.com Fund Research (EPFR) also revealed that select South African companies, benefiting from a rise in commodity prices, have also been targeted by fund managers.
EPFR surveyed 716 global emerging markets with US$150bn in assets. In January and February, these funds bought US$240.4m more emerging markets equities than they sold despite a near 4% decline in the sector.
“Funds are favouring China and India in the current environment because of their defensive qualities, said Brad Durham, a managing director of EPFR.
Both of these markets have strong domestic demand and limited exposure to external demand shocks. They are relatively safe havens for international investors.”
China continued to lift the fortunes of emerging Asia, attracted inflows of US$343m or a 9% increase.
“As [China’s] trade with the rest of Asia continues to increase, it is leading to upward revisions in growth forecasts in countries such as Malaysia and Thailand,” added Durham.
In addition, India has benefited from the outsourcing trend from developed markets. Indian equities have pulled US$105m so far this year , partly due to anticipation of a positive fiscal package unveiled in March. The market disappointed as the MSCI India index had declined by 8% by March-end.
Other results included:
- Hong Kong equities enjoyed their third consecutive month of net buying, attracting US$215.2m inflows. Dividend yields of 4% are among the highest in the world.- Managers also appear to be buying Indonesia again after recent falls of large cap stocks such as Indosat and Telkom. - Funds have also been taking profits in Thai equities after last year’s 25% market gain and the 7% rise in January.
Managers also continued to shed Taiwanese, Korean and Brazilian holdings. And despite the price of oil reaching historically high levels in 1Q03, funds were still decisive sellers of major oil exporters Russia and Mexico.
“Russia’s economy is sound but, since it is perceived to be higher risk, it always suffers heavy selling amid global economic and political uncertainty, while not even higher oil revenues is enough to spark interest in Mexico’s uninspiring economic fundamentals,” said Durham.
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