Cart: $0.00 - (0 items )

Low rates, softer dollar bolster inflows to emerging market funds

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.