Ukraine doing the sneezing but Japan and emerging Asian fund groups catching colds
While events in the Ukraine continued to dominate the headlines during the second week of March it was Japan, China and other Pacific equity fund groups that experienced the heaviest redemptions as investors paid more attention to cold hard numbers than heated rhetoric.
EPFR Global-tracked China and Japan equity funds posted their biggest weekly outflows since Q1 2008 and Pacific regional funds since Q3 2007 as macroeconomic numbers from the world’s second and third largest economies undershot expectations.
The diplomatic sparring and sabre rattling involving Russia, Europe and the Ukraine over the future of the Crimea had a limited effect on fund flows. But they suggested that, in the short run, investors see Europe paying a bigger price than Russia if tensions escalate. Russia equity funds posted their biggest inflow since mid-2Q13 while flows into Europe equity funds slid to a 17 week low and Europe bond funds posted outflows for the first time since December.
Overall, EPFR Global-tracked equity funds absorbed another USD3.1bn during the week ending 12 March, while bond funds took in USD3.4bn. Flows into money market funds totalled USD7.8bn, the bulk of which flowed into Europe and Japan MM Funds.
EPFR Global-tracked developed markets equity funds maintained their current inflow streak heading into mid-March on the back of solid flows into US and global equity funds. But flows into Japan and Europe equity funds stumbled and overall retail redemptions climbed to a 12 week high. Outflows from Japan equity funds hit their highest level in over five years as Japan’s fourth quarter GDP growth was revised downward and the country’s trade data showed exports growing at half the pace of imports during January. A significant hike in the national sales tax is also less than three weeks away.
Europe equity funds took in fresh money for the 37th straight weeks. But the USD131m they absorbed was the smallest amount since that run began. Fund groups dedicated to markets seen as vulnerable to tensions with Russia struggled, with Germany and UK equity funds again posting outflows.
France equity funds took in fresh money for the fourth time in the past six weeks, and flows so far this year suggest that the Netherlands may have replaced France as investors’ candidate for the ‘sick man of Europe.”
Although recent data and forecasts suggest that the Eurozone’s fifth largest economy is pulled out of a nearly two-year recession, YTD redemptions from Netherland’s equity funds after the latest outflows – the eighth in the past 12 weeks – stand at 6.5 per cent in percentage of AUM terms, more than three times the number for Denmark equity funds, the next hardest hit European country fund group.
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