>FUN WITH FLOWS (CITI)

Equity Fund Inflows Losing Momentum

■ Inflows to Asian funds halved — Although Asian equity funds continued to take in new money this week, the amount fell sharply to US$0.9m vs. US$1.9bn in the prior week, according to EPFR Global. Other emerging market funds (with the exception of LatAm funds) as well as global equity funds also faced decreased inflows: GEM fund inflows were down 24% WoW, EMEA funds 72% less and Global funds –47%.

■ An early sign of rolling over? — Asian funds saw net redemptions 63% of the time in June over the past eight years. For the rest of the time when net inflows were recorded, redemptions were recorded in May. Given inflows to Asian funds have been strong in April and May this year (US$8.1bn vs. US$7bn over the same period in 2008), we believe that the risk of foreign fund flows is on the downside. For instance, net outflows in June 08 totaled US$4.8bn.

■ Regional Asian funds took in new money the most in dollar terms — This also indicates that net inflows to all Asian dedicated funds are close to tops, as investors seem to lack clear preferences after strong market rallies.

■ Inflows to China funds dropped the most; India funds saw increased interest — Inflows to China funds decreased from an average US$501m/week in the past month to US$273m last week. By contrast, flows shifted towards India funds post elections. This country is a consensus underweight at Asian & Global funds.

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