Investors valuing India positively; EMs attractive: EPFR

Cameron Brandt, director-research, EPFR Global who tracks fund flows into developed and emerging markets says that the emerging markets (EMs) equity funds in the last week have observed one of its best weeks in terms of flows in the past 7-and-a-half months.

Speaking to CNBC-TV18, Brandt says that there is now a renewed appetite among investors for individual markets, leading which is Brazil and Korea.
"India seems to be one of the bigger individual market that investors seem to be reappraising positively," he adds.
Additionally, due to the massive beating seen in EMs, they are likely to be more attractively valued asset class, adds Brandt. Below is the edited transcript of Brandt’s interview to CNBC-TV18. Q: What kind of flows have you been seeing into emerging markets (EMs) like India and has it been purely exchange traded fund (ETF) related money or do you get a sense that it could be long only funds as well?
A: It certainly has been led by ETF money, but there are some signs that retail outflows are beginning to moderate. Over the past few weeks, investors have shifted away from a regional focus, that has carried them through much of the year from the heady first few weeks of 2013. They are now back to much more tightly focused markets. The EM equity funds, has had their best week last week in the past 30 weeks.
To a large degree that was driven by renewed appetite for couple of individual markets and foremost among them is Brazil, Korea seems to be turning and India seems to be one of the bigger individual market that investors seem to be reappraising positively. Q: For a dollar investor including both the dollar-rupee gain as well as the stock gain, in some cases it would be as high as 40 percent in the last couple of weeks. Are you getting a sense that the oversold nature of market is now at an end and would you think the flows are tapering, will taper?
A: I think there is a good chance. We have seen a very significant run in the amount of money in money market funds, which is something of a proxy for cash. And since the latest financial crises began in 2008, we have seen a clear pattern where investors turned very cautious during the middle of the year and tend to go looking for attractive asset classes as the year comes to a close. Given the beating that EMs have taken, one can certainly make the case that they are among those attractively valued asset class at the moment. Q: Did you get a sense what percentage of the flows that came into emerging markets especially India could have been sovereign wealth funds, the guys who stay Put and how much of it were hedge funds making a quick buck on currency and equities?
A: From what we are seeing, neither the bulk of it has been institutional money channel through ETFs. They can start building positions but still need to pull their toes back if they push them in too early.