Is it time to pull money from emerging markets or to pile back in? From the recent torrent of money fleeing the emerging markets, the first option would seem like a no-brainer, yet there are signs that the stampede might be reversing direction.
Bloomberg reports that emerging-market stock mutual funds had their first inflows in seven weeks in the week to Wednesday as investments in developed-market funds slowed, according to Citigroup. An inflow of US$17 million during the week was the first since January 19, according to a report by Markus Rosgen, a Hong Kong-based Citigroup strategist, which cited data compiled by research firm EPFR Global.
Prior to this reversal, emerging-market funds recorded six straight weeks of outflows as violence in Libya disrupted oil supplies and fuelled concern that inflation would hurt developing economies.
However, crude on Friday was headed for its first weekly decline in four, sliding below US$114 after the massive earthquake in Japan.
The benchmark MSCI Emerging Markets Index is down by about 3.7 per cent since the start of this year. Many leading emerging-market funds, as the accompanying Morningstar chart shows, have also been in the red this year.
Hong Kong-based Ivan Leung, chief investment strategist at JP Morgan Private Bank in Asia, sees more volatility in the near term in emerging markets, but advises investors to ride out the turbulence. 'The structural long-term story for emerging markets is intact,' Leung says.