Emerging Markets 01 (May 08 - Dec 11)

[winston]

Emerging-Market Bond Fund Inflows Exceed $5 Billion (Update1)
By Garfield Reynolds and Khalid Qayum

April 30 (Bloomberg) -- Emerging-market bond funds have had their three best weeks on record this month, taking in more than $5 billion as investors favored local-currency assets, EPFR Global said.

Funds tracked globally by EPFR that invest in debt recorded net inflows of $6.73 billion for the fourth week of April, while those focused on equities took in $4.86 billion, according to a statement released late yesterday by the Massachusetts-based firm.

Money flowed out of Europe equity funds for a 12th week as Standard & Poor’s slashed Greece’s credit rating to junk, and downgraded Portugal and Spain.

“Bond funds retained their momentum in late April despite the sound and fury generated by Standard & Poor’s downgrades of three Eurozone members and a jump in the risk premium for emerging markets debt,” the statement said.

Emerging-market bond funds took in $1.22 billion during the week ended April 28 and of this 75 percent was invested in those focused on local- currency debt, EPFR said.

Pacific Investment Management Co., which runs the world’s largest mutual fund, yesterday said China’s yuan, South Korea’s won and Singapore’s dollar are attractive as Asian economies “warm to the benefit of currency gains” in boosting consumer purchasing power.

Analysts surveyed by Bloomberg predict the three currencies will strengthen 4.1 percent, 5.5 percent and 1.4 percent, respectively, versus the dollar this year.

Developing nations’ dollar bonds fell yesterday, widening their yield premium over U.S. Treasuries to 259 basis points, JPMorgan Chase Co.’s EMBI+ Index shows. The gap closed to 230 basis points on April 15, the tightest it’s been since 2007.

Global equity funds absorbed in excess of $1.7 billion last week and those investing in Emerging Europe, Middle East and Africa stocks took in the most late October, according to EPFR, which tracks funds with some $13 trillion of assets. Global bond funds and those focused on U.S. debt each took in more $2 billion.

http://www.bloomberg.com/apps/news?pid= ... SHRiLDok_k

[winston]

Bond, Emerging-Market Stocks Lose Funds on Greece (Update1) By Shiyin Chen

May 14 (Bloomberg) -- High-yield bond funds posted the largest outflows in five years and emerging-market equity funds had a second straight week of redemptions as Europe’s sovereign- debt crisis dented demand for riskier assets, EPFR Global said.

Investors pulled $1.03 billion from bond funds tracked by the research company globally in the week ended May 12, the first net outflows since March 2009.

Equity funds worldwide took in a net $9.89 billion, according to an e-mail by EPFR. China equity funds posted their second straight week of outflows.

“Fears that Greece’s fiscal problem could raise borrowing costs around the world and plunge Europe back into recession prompted a crash re-rating of the outlook for emerging markets in early May,” the research company said.

Latin America equity funds saw outflows rise to the highest in 85 weeks, while those investing in Asia, excluding Japan, experienced their worst week in more than a year, EPFR said.

Emerging Europe, Middle East and Africa funds also lost $350 million during the period, according to the research company.

China Outflows

China equity funds extended outflows as government reports this week showed consumer prices rose the most in 18 months and property prices jumped by a record, fueling concern policy makers will introduce further tightening measures. The Shanghai Composite Index this week entered its second bear market in nine months, according to data tracked by Bloomberg.

Redemptions from India stock funds jumped to the highest since the third quarter of 2008, Russia funds ended a 12-week winning streak while those investing in Brazil stocks lost $250 million, according to the e-mailed statement.

High yield bond funds reported net outflows of more than $2 billion, while emerging-market bond funds took in $22 million, according to the report.

http://www.bloomberg.com/apps/news?pid= ... voFSJ3mjY0

[winston]

Emerging Market Equity Funds Get Inflows, EPFR Says (Update1)

June 18 (Bloomberg) -- Emerging-market equity funds received the second-largest net inflows this year in the week to June 16 as investor appetite for risk revived after concerns eased about the impact of Europe’s debt crisis, EPFR Global said.

Emerging equities funds got $2.5 billion, while emerging bond funds received $659 million, the fund tracker said in an e- mailed statement.

“Sentiment towards emerging markets continued to thaw in mid-June as investors started paying more attention to solid macroeconomic numbers from the U.S.,” Cambridge, Massachusetts- based EFPR said. Investors also focused on “encouraging industrial production data from the Eurozone,” it said.

The MSCI Emerging Markets Index, which tracks developing- nation equity markets, has gained 11 percent since this year’s low on May 25, as concern eased that the global economic recovery will falter. U.S. industrial output increased last month and Spain managed to sell 3.5 billion euros of bonds.

The “momentum” in China’s economy helped funds investing in the world’s third-largest economy take in new money for a fifth consecutive week, according to EPFR.

More than half of inflows into emerging markets bond funds went to those that invested in local-currency securities, EPFR said.

Emerging-market bonds handed investors a 5 percent return this year, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index, the broadest gauge of markets in 39 countries. Treasuries climbed 4.7 percent and European debt rose 2.8 percent, according to Bank of America Merrill Lynch’s indexes.

The yield premium investors demand to own emerging-market debt over U.S. Treasuries narrowed to 3.1 percentage points on June 16, compared with 3.4 points a week earlier, according to JPMorgan’s EMBI Plus Index. The spread reached 3.55 points on May 25, the widest since September 2009.

http://www.bloomberg.com/apps/news?pid= ... .I77ztd6as

[winston]

The Case for Emerging Markets
July 19, 2010

One of the best selling points for investing in emerging markets is growth potential, but like any other sector, this growth must come at a reasonable price.

Emerging market stocks are cheap these days. The MSCI Emerging Markets Index has a 12-month forward price-to-earnings ratio of 10.8x, which is 15 percent below the P/E for the MSCI World Index.

As you can see on the chart below, this valuation has rarely been more attractive – it is 15 percent below the long-term average.

On top of that, significant sales growth is expected in global emerging markets – 15 percent and 10 percent, respectively, for 2010 and 2011. The EMEA (Europe, Middle East and Africa) region is expected to lead the way – within EMEA, Turkey is seen as the star with nearly 30 percent sales growth this year and 17 percent in 2011.

Other emerging market standouts in expected sales growth: Taiwan (28 percent), Russia (15.8 percent) and India (15 percent). At 5.5 percent growth, the Philippines is expected to be the laggard.

Sales growth and margin expansion drive earnings growth – UBS predicts a 34 percent jump in earnings for emerging-market equities this year and another 12 percent in 2011.

Emerging market companies also have cleaner balance sheets and lower leverage compared to global peers. Debt-to-equity levels are low and heading lower – UBS sees a drop to 22 percent in 2011 from 28 percent this year.

This balance sheet strength gives those companies strategic advantage in raising dividends and targeting their capital expenditure toward areas with the highest potential for return.

The table above from J.P. Morgan shows public-sector debt of selected countries in developed and emerging markets. The contrast is staggering, particularly the rate at which debt is growing in the largest economies – more than 30 percent this year in the U.S., Japan and Britain.

Among emerging markets, only Hungary and the Dominican Republic are expected to see double-digit increases in public-sector debt. China and Indonesia should see a decrease in 2010, while India and Russia are seen as pretty much flat.

This trend represents a major reversal from the past, when investors in developing economies often had to factor in large sovereign debt, high default risk and wildly fluctuating currencies. Government policy changes have contributed greatly to stronger economic fundamentals in many emerging nations, while policy moves by governments have been a source of weakness and uncertainty in the developed world.

Emerging markets have outperformed the world market by 400 basis points since April, when Europe’s sovereign debt crisis accelerated. The key factors discussed above – greater sales growth, cleaner balance sheets and cheaper valuations – make a good case for emerging-market equities to continue this outperformance over the longer term.

http://www.usfunds.com/investor-resourc ... kets-3356/

[winston]

Emerging Equity Fund Weekly Inflow Exceeds $3 Billion (Update1)
By Chan Tien Hin

July 20 (Bloomberg) -- Emerging-market equity fund inflows jumped to more than $3 billion in the week to July 14 as the start of the U.S. earnings season prompted a rebound in optimism, according to EPFR Global.

Indian equity funds absorbed $114 million, a 13-week high, as forecasts for monsoon rainfall improved, while Brazilian stock funds attracted $97 million, the most in 20 weeks, EPFR said in an e-mailed statement.

“Cautious optimism that the prospects for a double-dip recession have been overblown, allied to some decent early second-quarter 2010 earnings reports” helped to bolster equity markets and fund flows, EPFR said.

The MSCI Emerging Markets Index rose 0.1 percent to 945.54 as of 9:23 a.m. in Singapore, its first gain on four days. A “double-dip” recession appears unlikely and U.S. stocks have the potential to climb higher in the second half of the year, Robert Doll, vice chairman of BlackRock Inc., the world’s largest asset manager, said today.

Flows into global emerging market stock funds rose to their highest level since the third week of October and those investing in Asia excluding Japan enjoyed a “solid week,” EPFR said. Global-tracked bond funds attracted $6.45 billion, the most since the last week of April, it said.

Latin America

Latin America equity funds were bolstered by renewed optimism about growth prospects in the U.S. and China, which helped lure $97 million to Brazil equity funds, EPFR said. That’s a 20-week high and ended 13 weeks of outflows, it said.

With another week of net inflows, the combined Frontier Market Equity Funds have almost reached the $1 billion market this year, it said. The amount is “well beyond” previous full- year inflows.

Emerging-market bond funds also took in $745 million, it said. They have absorbed a record $18.5 billion so far this year, reflecting renewed appetite among investors for hard currency debt, it said.


Source: Bloomberg

[winston]

Emerging-Market Inflows Prompt Sell Signal: Technical Analysis
By Michael Patterson

July 30 (Bloomberg) -- Emerging-market stocks are poised to fall after developing-nation equity funds had the second-biggest inflows this year, exceeding a level that preceded previous selloffs, according to BofA-Merrill Lynch Global Research.

Investors poured $3.2 billion into emerging-market funds in the past week, bringing four-week inflows to about 1.5 percent of their total assets under management, Michael Hartnett, BofA’s chief global equity strategist in New York, wrote in a report today, citing data from EPFR Global.

That triggered a sell signal from Hartnett’s fund flows “trading rule,” which says four-week inflows totaling at least 1.5 percent of assets under management may foreshadow market declines.

The last sell signal on April 28 was followed by a 9.2 percent decline in the MSCI Emerging Markets Index the following month. Similar signals in April 2008, July 2007, September 2007 and April 2006 also predicted market drops within about four weeks, according to Hartnett.

“Today, compared to April, consensus is less bullish on the global economy and less positioned in global equity markets,” Hartnett wrote. “But the trading rule strongly predicts relative underperformance by emerging markets in August. We continue to predict medium-term outperformance by emerging-market equities.”

The MSCI emerging gauge has climbed 7.8 percent this month as European bank stress tests and U.S. earnings reports boosted investor confidence in the global economic recovery. The gauge declined 0.5 percent to 989.26 at 8:04 a.m. in New York, the first retreat in nine days.

Some strategists use fund inflows as a contrary indicator because they may signal investors with a positive view of the market have already purchased shares.


http://noir.bloomberg.com/apps/news?pid ... ZfCmFqFIEc

[winston]

The Next Big Emerging Markets?
August 02, 2010

When countries get grouped together for economic or political purposes, an acronym or other shorthand device is soon to follow. OPEC, EU and G7 are a few of the old standards, while G20, PIIGS (European nations with dangerously large sovereign debt burdens), and of course BRICs are newer examples.

Now The Economist is getting into the game with “CIVETS”: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa – six countries that could be the next wave of emerging markets stardom.

The Economist’s basic case: these six have large and young populations, diversified economies, relative political stability and decent financial systems.

In addition, they are for the most part unhampered by high inflation, trade imbalances or sovereign debt bombs.

http://www.usfunds.com/investor-resourc ... lk/?i=3506

[winston]

This Time It's Different, as Emerging Stocks Top World
By Michael Patterson and Tal Barak Harif

Emerging-market stocks are trading at the highest valuations relative to advanced-country shares in more than two years as faster economic growth persuades the biggest investors to look past historical sell signals.

HSBC Global Asset Management, Morgan Stanley and Deutsche Bank AG say this time is different because developing nations have less debt, more profitable companies and are growing twice as fast as advanced economies. Global money managers are more bullish on emerging markets than any region, while mutual fund investors poured $35 billion into the countries this year, even as they pulled $28 billion from the U.S., Europe and Japan, data from Bank of America Corp. and JPMorgan Chase & Co. show.

A net 38 percent of money managers who invest worldwide had “overweight” positions in emerging markets last month, up from 34 percent in July, a Bank of America Merrill Lynch survey showed. Money managers had “underweight” holdings in the U.S., Japan and the U.K, according to the survey of investors who oversee about $513 billion.

“There’s a growing feeling that emerging markets are where the future lies and the traditional way of looking at emerging markets as a risky play on the developed markets is no longer valid,” Julian Mayo, who helps oversee about $2.8 billion as an investment director in London at Charlemagne Capital, said in a phone interview. “You’ve got the element of economic independence and you’ve also got better earnings.”

Bigger Returns

Smaller debt burdens will help developing countries grow 6.4 percent as a group next year, topping the 2.4 percent expansion in advanced nations, according to forecasts from the Washington-based International Monetary Fund. Emerging-market debt will amount to about 40 percent of gross domestic product this year, compared with 107 percent in advanced nations, IMF estimates show.

Companies in the MSCI emerging index will boost profits 29 percent in the next year, topping 28 percent growth for MSCI World companies, according to more than 5,000 analysts’ estimates compiled by Bloomberg. Emerging-market companies are also finding better opportunities to reinvest their earnings, producing a return on equity of 14.8 percent, compared with 10.2 percent in the developed world, according to Morgan Stanley.

‘Structural Premium’

“The major fundamental reason to expect further outperformance of emerging-market equities versus developed- market equities is the superior return on equity,” Jonathan Garner, the chief Asian and emerging-market strategist at New York-based Morgan Stanley, wrote in an Aug. 25 research note.

He estimates the MSCI emerging index will extend its gain over the MSCI World this year to as much as 20 percentage points from about 5 percentage points as of yesterday.

“You would want to see emerging markets handle not just one economic cycle, but several economic cycles, and see some of these gains cemented into place before you can talk about a structural premium,” Stefan Hofer, an emerging-markets equity strategist in Zurich at Bank Julius Baer & Co., which oversees about $160 billion worldwide, said in an interview.

Templeton Asset Management Ltd.’s Mark Mobius said in an interview with Bloomberg Radio on Aug. 20 that he’s “very, very confident” buying emerging-market equities because of faster economic growth and lower debt levels than advanced nations.

“In emerging markets, valuations are getting rich because you know the long-term story is very strong,” Frederick Searby, a New York-based Latin America equity strategist at Deutsche Bank, said in an interview. “The growth prospects are much better.”


http://www.bloomberg.com/news/2010-09-0 ... world.html

[winston]

Goldman Sachs Sees Record `Wall of Money' Headed Toward Emerging Markets
By Jason Webb - Sep 10, 2010

Net capital inflows into emerging market economies are running at record levels, pushing up asset prices and raising the risk governments may impose capital controls, Goldman Sachs Group Inc. said in a research report today.

Capital inflows into emerging markets are running at $575 billion a year, more than ever before and 20 percent higher than before the world financial crisis, according to an e-mailed report by Robin Brooks, a senior foreign exchange strategist for Goldman in New York.

Low interest rates in the developed world are leading investors to seek higher returns in faster-growing emerging economies, he said.

“Our baseline case remains of moderate growth in the advanced economies,” Brooks said. “This is contributing to direct ‘a wall of money’ to emerging markets in search of higher yields.”

Capital inflows help emerging economies by providing cheap financing, lowering bond yields and boosting domestic demand, Goldman said. They also push currencies to appreciate and create inflationary pressures which could lead some countries to impose controls on funds entering from abroad, Brooks said.

“Some emerging markets have already resorted to capital controls, and the risk of further such measures remains,” he said.

Capital Controls

In June, South Korea tightened limits on maximum holdings of currency derivatives by banks in an attempt to reduce the volatility of capital inflows. The same month, Indonesia’s central bank said it would insist investors in its one-month bills hold the securities for at least four weeks. Brazil imposed a 2 percent tax on foreign investors’ purchases of shares and bonds in October last year.

South Africa’s ruling African National Congress proposed in a discussion document July 30 that an inflow tax be considered to help curb the rand’s appreciation. The currency has strengthened more than 30 percent against the dollar since the beginning of 2009.

National Treasury Director-General Lesetja Kganyago said in September the country relies on the foreign money to finance its current-account deficit, and shouldn’t impose a tax on the inflows.

Goldman recommends investing in the currencies of Asian countries benefitting from growth in China, he said.


http://www.bloomberg.com/news/2010-09-1 ... rkets.html

[winston]

Fund Inflow

Investors added the most in six weeks to equity funds tracked worldwide, according to research firm EPFR Global.

The funds took in a net $8.43 billion in the week ending Sept. 8, according to the Cambridge, Massachusetts-based company.

About $1.87 billion was added to emerging-markets equity funds during the week, the data showed.


http://www.bloomberg.com/news/2010-09-1 ... rally.html