Emerging Equity Funds Post First Outflows Since May

Emerging Equity Funds Post First Outflows Since May


By Jonathan Burgos - Dec 24, 2010 12:28 PM GMT+0800

Emerging-market equity funds posted the first net withdrawals since May in the week ended Dec. 22 amid concern China will continue tightening monetary policy, trimming a record-setting year for inflows, EPFR Global said.

For the year, emerging-market stock funds have taken in a record $92.5 billion and bond funds investing in developing economies had inflows of $52.5 billion, nearly seven times their previous annual inflows on record.

"Uncertainty about inflationary trends, investors’ fear of being caught up on the wrong side of capital controls and basic profit-taking kept the pressure on EPFR Global-tracked emerging markets funds going into the final week of 2010,” the Massachusetts-based research firm in an e-mailed statement.

China’s central bank raised bank reserve requirements on Dec. 10 for the third time in five weeks as inflation quickened to its fastest pace in 28 months in November. Home prices in 70 Chinese cities climbed 7.7 percent in November from a year earlier, even after the government raised borrowing costs for the first time in three years, suspended mortgages for third- home purchases and pledged to introduce a property tax.

The Shanghai Composite Index fell 0.5 percent as of 11:30 a.m. local time, on course for a 1.8 percent weekly retreat. The measure has lost 13 percent this year, making China the worst- performer among Asian stock markets, according to data tracked by Bloomberg. The MSCI Emerging Markets Index, tracking 21 developing nations, sank 0.2 percent, snapping a three-day gain.

Stock funds overall took in $4.5 billion during the week, while bond funds had net redemptions of $2.3 billion, according to the research company.