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Tuesday, 21 October 2014

BONDS: EM funds see outflows as safety bid intensifies

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Investors scrambled out of emerging-market funds and other risky asset classes into the relative safety of money-market investments as anxiety over Greece’s exit from the Eurozone intensified, according to the latest fund-flow data.

Data from fund-tracker EPFR Global showed outflows of US$478m from emerging-market bonds in the week to May 23, compared with inflows of US$634m in the preceding week.The outflows were evenly divided between hard-currency and local-currency bond funds.

Still, these departures are small relative to the year-to-date inflows. Before this week’s outflows, emerging-market funds had received new subscriptions of US$13.079bn for a weekly average of about US$650m.

Outflows from high-yield and emerging-market equities continued as concerns over growth and the failure of European policymakers to make any significant breakthrough to resolve the debt crisis weakened the appetite for riskier assets.

High-yield funds reported outflows of US$3bn, more than six times the previous week’s US$443m. Prior to this, the previous four week’s cumulative inflows amounted to US$3.644bn.

Emerging-equity funds lost US$2.162bn, slightly lower than the previous week’s US$2.325bn.

These outflows are not small relative to the year-to-date inflows. Prior to these departures, emerging-equity inflows aggregated US$17.156bn

Money-market funds, in contrast, received inflows of US$11.4bn, compared with the previous week’s outflow of US$6.5bn.

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