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Investors spooked by Middle East unrest

Outflows from emerging market equity funds were the highest in three years in the week ending 4 Feb.

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Data from EPFR Global shows that the rotation away from emerging markets, which began in the last quarter of last year, has continued to gather pace, with unrest in Egypt and Tunisia and rising oil prices compounding fears over inflation and valuations.

In total, $7.02bn was pulled from EPFR Global-tracked emerging market equity funds during the week. All four of the major fund groups suffered outflows, with global emerging markets equity funds recording net outflows of $4.5bn, and redemptions from Asia ex-Japan Equity Funds hitting a 157-week high.

EPFR said at least some of the outflows were driven by the spectre of another jump in prices due to higher energy prices as tension in the Middle East sent the price of oil back through the $100 a barrel level.

However, as the world’s largest non-Middle Eastern oil producer, Russia was a beneficiary of the unrest, with Russia equity funds posting inflows for the twentieth time in the past 21 weeks. This investor interest was not enough, however, to stop dedicated BRIC Equity Funds from posting their tenth consecutive week of outflows or preserve EMEA Equity Funds’ 20 week inflow streak.

Meanwhile, developed market equity funds took in $6.6bn, bringing their year-to-date inflows to $33.4bn. Only one of the five major fund groups, Europe equity funds, posted outflows.
 

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