Emerging-Market Equity Funds Draw Cash, Pace Slows, EPFR Says

By Patricia Lui and Garfield Reynolds

May 29 (Bloomberg) -- Investors poured money into emerging- market equity funds for a 12th week, albeit at a slower pace, led by a surge in U.S. consumer confidence and rising commodity prices, research firm EPFR Global said.

Inflows slowed to $2.1 billion in the week to May 27 from $2.5 billion the previous week, as China “exerted less of an influence,” according to a report from the Cambridge, Massachusetts-based company published yesterday. Cash flowing into Chinese equity funds dropped to a nine-week low of $18 million from $273 million the previous week, EPFR said.

The MSCI Asia-Pacific Index of regional shares and the emerging-markets gauge headed for the highest close since October as the biggest jump in U.S. consumer confidence in six years and signs the housing market is stabilizing boosted risk appetite. There was no data out of China this week to guide investors following a May 15 report that showed retail sales growth accelerated in April.

“There was a clear preference for more diversified exposure,” EPFR said. “Other fund groups geared to developed markets posted inflows,” as declines in U.S. unemployment, confidence and exports started to “level off.”

Taiwan and Russia continued to draw money, EPFR said. Taiwan equity funds have attracted more than $1 billion over the past 12 weeks, and Russia posted an 11th week of inflows as oil prices rose above $60 a barrel, the company said.

High-Yield Bonds

Global emerging-market funds received $1 billion in the week, with $647 million going to Asia ex-Japan, down from $933 million. Latin America took in $242 million and Emerging Europe, Middle East and Africa $123 million, EPFR said.

Money market funds had the best showing since the first week of March, taking in $7.3 billion compared with a net outflow of $21 billion the prior week, the research firm said.

Emerging-market equity funds tracked by EPFR attracted $23.2 billion of investment in the 12 weeks to May 27, giving net inflows for the year of $22.3 billion compared with $53.8 billion flowing out of developed markets, the company said.

Investors also showed a preference for High Yield Bond Funds, Global Bond Funds and Emerging Market Bond funds, the EPFR report showed.

U.S. Bond Funds took in $1 billion for 13 of the past 16 weeks, it said. High Yield Bond Funds absorbed $872 million, the second-best week of the year, bringing total inflows in 2009 to $9.6 billion.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net; Garfield Reynolds in Sydney at greynolds1@bloomberg.net