Investors pull record $6.3bn from emerging market equity funds
Figures from EPFR Global show institutional investors, who removed over $5bn, represented the bulk of the emerging market sellers during a week in which central banks struggled to regain control of their currencies.
Aggressive rate hikes in Turkey and then South Africa proved ineffective in strengthening the Turkish lira and South African rand, causing emerging market equities to slump in turn.
EPFR said the $6.3bn outflow for the week to 29 January is the largest amount on record in terms of US$ terms, and the largest since the first quarter of 2011 in terms of percentage under assets.
Year-to-date redemptions from emerging market equity funds now stand at $12.2bn, compared to $15bn for the whole of last year, according to EPFR. ETF redemptions accounted for two-thirds of this year’s withdrawals.
Of the main sub-sectors, global emerging market equity funds suffered their worst week on record in the seven days to 29 January, while EMEA, Latin America and Asia ex. Japan equity funds also failed to escape the sell-off.
With data this weekend confirming a slowdown in Chinese production numbers, emerging market equities endured another difficult day’s trading overnight, with key indices dropping 1% or more.
Japanese markets also continued to suffer: the Nikkei closed down 2% this morning to take year-to-date losses to 10%. That follows a 57% surge for the index last year.