Investors ploughed more cash into emerging market funds in the week since the asset class’ stock benchmark touched its highest level since 2014.
Emerging market equity funds counted $2.2bn of inflows in the week to August 2, while EM bond funds recorded $1.9bn of fresh capital commitments, according to flows tracked by EPFR. The additions lift inflows since the year began to nearly $90bn for the two fund categories.
Enthusiasm for emerging markets has been bolstered by low interest rates across the globe and a renewed drop in the US dollar. The MSCI emerging market stock index has climbed more than 23 per cent this year.
“Economic growth is generally stable, narrowing current account balances — a sign of improving fiscal health — and emerging market currency volatility is low,” said Bill Merz, a strategist with US Bancorp Wealth Management. “While valuations remain elevated, the fundamentals appear somewhat compelling for investors with a higher risk tolerance.”
In the developed world, investors showed a continued preference for European stock funds over their US counterparts. European equity funds notched their fourth consecutive week of inflows, although additions decelerated from a week prior. US stock funds suffered their seventh straight week of redemptions, with outflows since mid-June topping $22bn.