Fun with flows (March) - EM Outflows Deepen on Growth Concerns - Citigroup

 Another week of EM outflows — EM equity investors remained restless with a wall of worries, but concerns appear to have shifted to growth from inflation. Outflows for the week ended Wednesday were US$2.7bn (0.4%AUM), slightly higher than the previous week. Asia ex-Japan and Latin America saw accelerated outflows whereas CEEMA improved to receive some new money. Global International funds recovered to a positive flows trend, driven by ETF buying. This suggests that the sell-off in equities has probably moderated from the week right after the Japan earthquake, but the focus was on DM equities.

 Japan ETF buying accelerated but so did selling of non-ETFs — Net flows were positive at 0.6%AUM versus 0.2% the previous week. BoJ buying likely accounted for much of the inflows into ETFs. Within AxJ, North Asian markets continued to be the relative winners. Taiwan, Korea and Greater China funds took in new money irrespective of accelerated outflows from overall AxJ funds.

 Consensus positions in AxJ and GEM funds little changed in February — A more noticeable move was that Taiwan and Korea under-weights were trimmed slightly further on average, funded by India, by fund managers in both fund groups. Sector-wise, AxJ fund managers on average added to the commodity plays (Materials and Energy) and Banks.

 Japan moved to OW (by ~50bps) in Global International Funds in Feb — An overweight of this magnitude in Japan was last seen in Q3 2007 (see figure 32). Cash weight of this fund group was sharply raised to 3.3%, above the historical averages. Funding was largely sourced by cutting US and AxJ, with HK/China weights reduced in the latter.