Fund flows rush to emerging mkts, commodities: EPFR

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Investors pumped money into emerging market assets and commodities to diversify away from a weak dollar in the week ending Nov. 18, but US equity funds also saw solid inflows on hopes for economic recovery, fund tracker EPFR Global said on Friday.

Equity funds globally absorbed a net USD 5.6 billion during the week, with 49 percent of that going to emerging market equity funds. Bond funds took in USD 5.7 billion.

US Equity funds:

Investors poured USD 1.97 billion into US equity funds during the week, with the bulk going into US large cap funds, despite lacklustre economic data, EPFR said.

European equity funds:

Flows into European equities were positive for a second week, and for the eighth time in 11 weeks, as valuations still looked attractive but exporters were feeling the pinch of currency appreciation.

Japan equity funds:

Japan equity funds saw outflows for a ninth week amid concern about the new government's ability to combat deflation and encourage consumption.

Emerging market equity funds:

Global emerging market equity funds have now attracted USD 56.8 billion this year, putting them on track to eclipse a record USD 50 billion in 2007. A year ago funds had seen accumulated outflows of USD 40 billion.

Including funds that report monthly, emerging market equity funds have seen net inflows of USD 71 billion this year.

- Strong Chinese economic data boosted Chinese equity funds, which took in USD 542 million -- a 27-week high.

- Asia ex-Japan equity funds saw year-to-date inflows top USD 17 billion.

- BRIC country funds -- Brazil, Russia, India, China -- as a whole took in USD 205 million for the week.

- Latin America equity funds took in USD 168 million and EMEA equity funds absorbed USD 94 million.

Strong inflows have prompted a growing number of emerging economies to consider capital controls or other curbs in recent weeks to stem rapid appreciation in their currencies that could destabilise their recovering economies.

Money market funds:

Investors pulled just USD 740 million from money market funds, taking year-to-date outflows to USD 452 billion.

"We will be closely watching money market fund flows for signs of a reduction of investor risk appetite since these cash piles have been a funding source for so much of the flows into equity and bond funds this year," said Brad Durham, managing director of EPFR Global.

Bond funds:

Global bond funds have taken in an average USD 1.7 billion a week in November so far. They set a monthly record in October, absorbing USD 17.4 billion.

- US bond funds have now posted inflows every week this year and took in UDS 2 billion in the week ending November 18 for a 16th straight week.

- Flows into high-yield bond funds hit a 14-week high of USD 744 million, helped by expectations for continued low US and European interest rates.

- Emerging market bond funds posted their second-highest weekly inflow tally since EPFR began tracking them, with particularly strong demand for emerging market local currency bond funds on expectations for emerging markets' currency appreciation.

Sector funds:

- Commodity sector funds saw their best week in more than three-and-a-half years as gold prices hit new records and other precious metals prices gained ground. A weak dollar and Chinese demand also encouraged investment.

- Commodity funds now account for nearly three quarters of all inflows into sector funds this year and took in a record USD 1.3 billion during the week, pushing year-to-date inflows above USD 13 billion.

- Energy sector funds saw a modest outflow for the week as fears of a double-dip recession resurfaced.