(Bloomberg News) Global emerging-market equity funds drew record inflows in the third week of October as investors sought growth in developing nations and the dollar weakened, according to EPFR Global.
The funds took in $3.8 billion in the week ending Oct. 20, the Cambridge, Massachusetts-based research company said in an e-mailed statement. Investors added $1.4 billion to emerging- market bond funds and withdrew money from Japan stock funds for the 16th week among the past 17. U.S. equity funds had net outflows of $1.9 billion, EPFR said.
Year-to-date inflows to global emerging-market equity funds exceed the record $44.2 billion for the whole of 2009, EPFR said. Nations from Brazil to China are striving to restrain their currencies to remain competitive as capital flow into emerging economies amid near-zero U.S. borrowing costs.
"On the U.S. side, you have quantitative easing, which Asia and the rest of emerging markets are becoming increasingly uncomfortable with because it's going to bring another wave of capital around them and create asset bubbles here," Bill Belchere, global chief economist at Mirae Asset Securities Co. in Hong Kong, said in a Bloomberg Television interview.
The MSCI Emerging Markets Index has rebounded 29 percent from the May 25 low, compared to the 17 percent gain in the MSCI World Index, which tracks developed markets.
The Dollar Index, used by IntercontinentalExchange Inc. to track the dollar against the currencies of six major U.S. trading partners including the euro and yen, has dropped 3.7 percent since Sept. 21, when the Federal Reserve said in a statement following its policy meeting that it's prepared "to provide additional accommodation if needed" to support the recovery. The Fed is next due to decide on monetary policy Nov. 2-3.
"Structurally, we think loose monetary policy and capital flows are likely to keep driving up Asian asset prices," UBS AG strategists led by Niall MacLeod said in a report. "This is good for domestic asset prices and consumption and by extension Asian financials and consumer stocks."
Investors committed more than $1 billion to funds dedicated to commodities, EFPR said. Technology sector funds attracted the most cash since the third quarter of 2009, driven by better- than-estimated company earnings, it said.