EMs see best weekly inflows in over 30 weeks

Emerging markets (EMs) have seen the best weekly inflows in over 30 weeks according to EPFR, the firm that tracks the fund flows data very closely, reports CNBC-TV18's Anuj Singhal.

Also read: Best time for Indian market to progress now: Chris Palmer

According to Cameron Brandt of EPFR, the positive inflows are due to the fact that EMs became attractive after the mid-year mayhem as investors turned cautious and some of the funds came back to emerging markets last week.

In fact the data points at secular inflow of money into equity markets. For the week ended September 11, equity funds saw inflow of USD 14.3 billion. A lion’s share of that went to developed markets with a total inflow of USD 11.7 billion.

However, for EMs which were starved of money, even the remaining USD 2.6 billion led to a big revival in sentiment and markets. What clearly stood out was India, which saw inflows of nearly USD 900 million in this week.

But here is the not-so-good news. The EM inflows are entirely due to ETFs, something which is known as ‘Hot money’ in financial world and which is not very stable in nature. In fact if one breaks the USD 2.6 billion EM inflows, the ETFs actually poured in USD 3.2 billion and non ETFs actually used the rally to sell and had outflow of USD 0.6 billion during this week.

Next week will be crucial for fund flows as the funds would make up their mind on equities once the Fed decision on tapering is out of way.