Mumbai: Emerging market funds posted highest weekly inflows in the week ended 9 January, as investors cheered a deal to stop the US from falling off the fiscal cliff of higher taxes and lower state spending, data from the global fund flow tracker EPFR Global showed.
Positive signs of economic recovery in China, the world’s second largest economy, also kept the sentiment upbeat.
Flows into emerging markets equity funds hit a record $7.39 billion during the first full week of January, and it extended their longest inflow streak since a 29-week run ended in mid-December 2010. Retailers joined the rally and their commitments climbed to a 61-week high.
Till 11 January, foreign institutional investors (FIIs), the drivers of Indian equities, have bought stocks worth a net $1.59 billion. At the end of trading on Monday, the Sensex, India’s bellwether equity index, gained 2.47% since the beginning of 2013. The IT index has been the best performer with a 12.83% gain and power, capital goods and fast moving consumer indices have been the losers.
Equity funds flows hit a five-year high during the week as retail commitments hit their highest level since late third quarter of 2009, EPFR Global said. The shift towards equities that had started in mid-December, continued as investors opted for riskier assets. The absolute figure of such inflows was not known.
Among countries, Russian equity funds saw the biggest inflows since early October, while dedicated Japan, China and Italy equity funds saw robust inflows.
In the losers’ pack, France equity funds recorded outflows for the 26th time in the 28 weeks since the start of second half of 2012.
China equity funds were the highlight among the Asia ex-Japan country fund groups on hopes that Chinese companies will regain some of their pricing power this year, optimism about US demand and further opening of the country’s capital markets to foreign central banks. They garnered $492 million in the week, adding to previous 17 continuous weeks of inflows.
Most major developed markets equity fund groups experienced strong flows in early January, buoyed by the relief about the US fiscal deal, the relative calm in the euro zone and the new Japanese government’s aggressively pro-growth stance.
Commitments to Japan equity funds jumped to a 20-week high as Shinzo Abe’s new administration pushed through a $115 billion stimulus package and maintained its pressure on the Bank of Japan to adopt a more aggressive inflation target.
Europe equity funds had a solid week with investors largely opting for diversified exposure to the region ahead of the European Central Bank’s January 10 meeting.
As far as sector-specific flows were concerned, flows into energy funds climbed to a 13-week high.
Financial sector funds recorded their sixth straight week of inflows as the strength and depth of support from central banks overshadowed news of more cost cutting.