Best week since early June. The weekly fund flow report from EPFR Global shows improving flows into Russia funds and, although one snow flake doesn’t make a winter, it adds to the build up of optimism that investors are looking more favorably at Russia risk.
In the week that the year to date gain for the RTS hit 100%, Russia funds reported inflows of $165 mln*. That is the highest number since the week of June 2nd and the second highest inflow since June 2008. The market Jonahs will of course point to the fact that the week of June 2nd was also the summer peak for equities and was followed with a very quick 20% market fall during which Russia funds were hit with large redemptions. So, the positive weekly fund flow comes with the caveat that retail investors are notoriously a lagging indicator for Russia.
Best relative week for Russia in 18 months. However, unlike the week of June 2nd, when inflows into all emerging market funds were very high, the most recent week shows redemptions, or weak inflows, to other emerging market funds. On a relative basis, this was the best week for Russia in almost eighteen months. China funds reported outflows of $114 mln (albeit that could have been a result of the national holidays approaching) and Brazil funds only received $20 mln. In the week of June 2nd Brazil funds reported inflows of $832 mln and Russia funds took in $182 mln. India funds were the best last week, attracting $180 mln. The improving preference for Russia has also been reflected in rising flows into Emerging Europe funds, in which Russia has a 44% weighting. This fund category reported redemptions almost every week in 2009 until end July. Since then, new money flows have been increasing and last week totalled $92 mln.
Investor preference for EM remains strong. Investor appetite for the emerging market asset class remained undiminished last week. GEM Balanced funds reported now money flows of $918 mln, bringing the September total to $2,465 mln and up from a net redemption of $280 mln in August. BRIC themed funds took in $81 mln last week, bringing the September total to $152 mln. August was better with a net inflow of $432 mln. Emerging Europe funds took $291 mln through September.
* The weekly fund flows reported by EPFR Global are only indicative of the trend. The report does not capture all fund flows; these are available on a monthly basis from EPFR with a several week time lag. But, historically, the weekly flows have accurately reflected the underlying trend.