Emerging Market Fund Outflows Hit $23 Billion, 3-Year Record

January 5, 2015

Barron's

Investors yanked their money from emerging markets in 2014, and the pace picked up at the end of the year.

Global emerging-market funds as a whole saw outflows of $23 billion, a 2.6% decline in assets under management, for 2014. That was the biggest outflow since 2011, according to UBS, quoting data from EPFR Global. Outflows were $15.9 billion in 2013. In 2012, emerging markets saw inflows of $50.4 billion.

The breakdown for 2014: global emerging market funds (-$8.6 billion), Latin America (-$5.50 billion), Asia ex-Japan (-$4.8 billion) and Europe/Middle East/Africa (-$4.2 billion).

The year-end contagion as Russia’s finances reached crisis levels in early December was a big factor in negative emerging market sentiment. But another factor has been the drop in the price of oil, exacerbated by oversupply from the U.S. and OPEC nations. The international Brent price for crude is off by nearly 5% to $53.66 per barrel today, while the U.S. price has stabilized above $50 after falling below that threshold earlier today.

In emerging market funds, the $17 billion outflow from Nov. 13 to Dec. 31 accounted for 74% of total 2014 outflows; the MSCI measure of global emerging markets fell 3.7% during the period. A bright spot: for the year, frontier funds reported net inflow of $2.5 billion.

UBS strategists Howard Park and Geoff Dennis write:

“Based on our model, relative positioning appears more crowded this week in Malaysia and Philippines, and less crowded in both Chile and Korea vs last week. Overall, the most crowded emerging markets (in terms of foreign investor flows), based on our model, are Qatar, United Arab Emirates, India, Taiwan and Russia. The least crowded are Colombia, Egypt, China, Turkey and Peru. India is as the most crowded BRIC while China is the least crowded.”

Among the biggest movers in recent trading: mining companies, which are rallying as oil prices tumble and gold prices rally. Brazil’s Petroleo Brasileiro (PBR) is down nearly 10%, while South African gold miners rose: Gold Fields Limited (GFI) and Harmony Gold Mining (HMY) are up 4.6% apiece, while AngloGold Ashanti (AU) is up more than 2%.  The iShares MSCI South Africa ETF (EZA) is down nearly 3%. The iShares MSCI Emerging Markets ETF(EEM) is down 1.8% today.

Tags: billions, dollars, funds, gold, markets, oil and gas, stock market
Posted in Global, Macro Economics, Funds