Funds Outflow From ASEAN Markets Slows, But Flows from Emerging Markets Back into Developed Markets Intensify

Business Times - 08 Feb 2011Funds outflow from Asean markets slows

But flows from emerging markets back into developed markets intensify

By TEH SHI NING

ASEAN markets saw a moderation in fund outflows last week, even as the reversal of fund flows back into developed markets from emerging ones intensified on shifting risk perceptions.

Foreign institutional investors withdrew a total of US$68 million from the Indonesian, Thai and Philippine stock markets, a Morgan Stanley Research report yesterday said. This was a moderation from total outflows of US$269 million the previous week.

In fact, Thailand saw a net inflow of US$18 million last week, after leading with US$308 million in fund outflows the week before. Volatility persisted though, with the Philippines and Indonesia posting fund withdrawals of US$65 million and US$21 million respectively last week, after marginal inflows the week before.


This means a cumulative US$1.7 billion in outflows from the three markets so far this year, compared with US$4.3 billion in inflows in 2010.

In the wider emerging market space, outflows swelled last week, as unrest in Egypt and Tunisia tried investors' nerves and concerns over inflation in emerging economies mounted, reversing the US$95 billion in fund inflows in 2010.

Fund-tracker EPFR Global said that investors pulled more than US$7 billion out of mutual funds and ETFs focused on emerging markets stocks last week, more than double the US$3 billion outflow in the previous week.

This was the third largest weekly outflow on record and of the emerging market funds, Asia-ex-Japan ones were hardest hit, a Citi equity strategy report last week said.

Funds flow weakness was widespread among Asia's individual country funds too. Outflows from China funds doubled from the previous week to US$455 million, overshadowing Hong Kong's net inflows. The only ones to see inflows last week were Japan and Korea funds, but even these were at sharply slowed rates, the Citi report added.


And the strong outflows from emerging markets continue to head developed markets' way. Global international funds recorded subscriptions in all the first five weeks of 2011, with cumulative inflows of US$9 billion thus far.

Further demonstrating the shift in investor sentiment, a Citi quantitative strategy report last week noted that while global equities have rallied, the Asia-Pacific regional index fell 0.74 per cent, 'underscoring the relative positive sentiment toward developed markets'. This compares with the benchmark MSCI AC World rising 1.6 per cent in January, while the European Monetary Union countries index rose 6.88 per cent and the US 2.39 per cent.

Meanwhile, yesterday's Morgan Stanley report also said that consensus earnings forecast for MSCI Asean was revised 14 basis points lower this week. Thailand and the Philippines were the main drivers of the downward revision, while Indonesia and Malaysia saw flat earnings.

Overall, MSCI Asean earnings are now forecast to grow 14 per cent this year, driven by 22.5 per cent growth from Indonesia. Singapore is now expected to see earnings growth of 11.6 per cent.

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