SENSEX NIFTY
Apr 05, 2013, 04.46 PM IST | Source: CNBC-TV18

Expect emerging Asia funds to see uptick in inflows: EPFR

In the past few weeks the Indian market has been losing its nerve and falling extensively. Most market analysts see sell of exchange traded funds (ETFs) as one of the main reasons for this weakness.

Cameron Brandt

Sr Analyst, EPFR Global

More about the Expert...

In the past few weeks the Indian market has been losing its nerve and falling extensively. Most market analysts see sell of exchange traded funds (ETFs) as one of the main reasons for this weakness. However, Cameron Brandt, Dir-Research, EPFR Global does not believe so.

"Index needs to fall to trigger big redemptions. It is more a case of actively managed funds rotating positions and a general uncertainty about the outlook for EMs as a whole," he said in an interview to CNBC-TV18.

Despite recent dips seen in emerging Asian markets, investors are paying more attention to these regions. "With India and China acting as two anchors for emerging Asia, I would expect to see an uptick in flows into emerging Asian funds, not a smooth and steady one, but somewhat bumpy over the next couple of months," he elaborated.

Meanwhile, he cautioned investors of a volatile April.

Also Read: Mass exodus of FIIs unlikely: Edelweiss

Below is the verbatim transcript of Cameron Brandt’s on CNBC-TV18

Q: India has underperformed in the past week compared to many Asian markets and developed equity markets. Have you noticed any outflows, especially from Exchange-Traded Funds ( ETF ) that invested in India?

A: Yes. March and April have been rough months for emerging markets (EMs) in general and the emerging Asia fund groups in particular. In case of India, it is slightly more collateral damage. There are two reasons that are spooking the investors in the region, one is Korea specific the Sabre-rattling on the peninsula, the other is fears that Japan’s aggressive efforts to drive down the value of its currency are going to trigger a currency war in the region that will hurt the export stories of a lot of markets.

In just a past couple of days, we have seen flows into emerging market funds beginning to pick up again and the latest data from the US has dented its relative attraction. India may head back to the path that we have seen for most of this year, that is flows coming in for a bit and flows going out for a bit and flows coming in for dedicated India funds.

Q: Can you break up the flows from March into how much has gone into developed markets and how much has gone out of EMs?

A: During March and into the first few days of April about USD 3 billion have been pulled out of emerging market equity funds while roughly USD 26 billion has flowed into developed market equity funds. It comes with a caveat, that money on the developed side is bypassing euro funds, with the bulk of it going into dedicated US & Japan equity funds.

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