The Strategist

Invesments in China's funds surpass $4B, other emerging markets are slumping

04/19/2021 - 03:35

China's funds surpassed $4bn last week, hitting a six-month high. Investors are attracted by the country's rapid economic recovery. However, due to the worsening epidemiological situation in the world, other developing countries cannot boast of notable inflows.

Mstyslav Chernov
Mstyslav Chernov
The latest Emerging Portfolio Fund Research (EPFR) data shows that international investors have started to increase their investments in emerging market funds after a one-week break. Based on a Bank of America report that takes EPFR data into account, inflows to emerging markets funds during the week ending 14th April topped $5bn. A week earlier there were symbolic outflows of $73m. In addition, last week's result was the highest since early March, when inflows exceeded $9.6bn; in the following weeks they fell to $1.6-2.4bn.

However, it would be premature to talk about a recovery of interest in emerging markets, since most of the inflows only came from Chinese funds. According to EPFR, the funds accounted for over $4bn, the highest weekly gain since early March. Investors are attracted by the strong growth of the Chinese economy, which grew 18.3% in the first quarter compared with the same period last year.

Excluding the performance of Chinese funds, the remaining emerging markets received around $1bn, the lowest inflow since October last year. Such investments have averaged $3.8bn a week since the start of the year. International investors withdrew $126 mln from Brazilian funds, one and a half times the result of the previous week. India funds lost $162 mln (2.5 times more than a week earlier). Investors are concerned about worsening epidemiological situation in these countries. Brazil and India have the third and second highest number of COVID-19 infections with 13.7 million and 14.8 million cases, respectively.