Friday, May 1, 2009

>Fun with Flows (CITI)

Back To Billion Dollar Inflows To Asian Equity Funds

Asian fund inflows reached US$1bn for the first time in a year — According to EPFR Global, inflows to offshore Asian equity funds carried on and rose to a 50- week high of US$946m in the week ended last Wednesday. The continuous inflows over the past seven weeks have taken YTD net flows to a positive US$1.6bn, compared with net outflows of US$8.1bn during the same period in 2008. From a 4-week average perspective, inflows are now as strong as those experienced in 2006 and 2007 (figure 2) and further upside seems limited.

China, Taiwan & India funds winners of the run of inflows; Singapore the loser While inflows to Korea funds were losing momentum, new money to China, Taiwan and India funds remained strong last week. On the contrary, Singapore country funds saw the most net outflows, not only last week but also last month. YTD this is the lone fund group for which net outflows have been reported. Singapore has been a consensus overweight at Asian funds for quite a while, but the overweight position has been narrowing, from 190bps in December to the current 110bps.

Excess liquidity seeking for high-return asset classes s.a. emerging market equities Not just Asian funds benefited from the significant increase in excess foreign liquidity (we look at the gap between supply and demand of money growth in G7), Global Emerging Market funds also received billions of US dollars of net cash last week. Year-to-date, net inflows to all global emerging market funds have totaled US$9.4bn, contrasting net redemptions of US$5.8bn from International equity funds.

To see full report: FUN WITH FLOWS