Investors are piling into emerging market equities even as they are pulling out of stocks in the sluggish developed world. According to EPFR, equity funds saw a net outflow of $3.16bn globally in the week to July 21 but emerging market equity funds posted a $1.5bn inflow.
After favouring EM bonds earlier in the year, investors seem to be looking more favourably at EM equities, with the equity funds inflow comfortably exceeding the EM bond funds inflow of $0.96bn.
The dominant markets are in Asia, followed by Latin America. By contrast, investors are cautious about eastern Europe. Despite the solid prospects of individual countries such as Poland, there are concerns about other economies, such as Hungary, and general worries about the region’s dependence on slow-growth western Europe.