LONDON – Emerging market equity funds suffered the biggest outflow since the 2008 financial crisis in the week to Thursday, as investors braced for a possible increase in U.S. interest rates later in the year, the first in almost a decade.
Investors pulled a net $9.27 billion out of emerging market equity funds in the week to June 10, according to data providers EPFR, of which $7.9 billion was from Asian funds.
China reported the largest weekly outflow in history, both in dollar terms ($7.12 billion) and as a percentage of assets under management (2.14 percent), Morgan Stanley noted.
However, that was largely caused by a $5.1 billion outflow from a single Chinese exchange-traded fund, according to Bank of America Merrill Lynch.
“Here comes the Fed,” BAML analysts said in a note on Friday.
Globally, a net $12 billion flowed out of equity and bond funds, the first time this year both equities and bonds have posted an outflow, BAML noted.
These flows are largely down to the increasing likelihood of a September move from the Federal Reserve, they said.
The $5.9 billion outflow from global bond funds was the largest weekly outflow in 18 months, led by redemptions from high yield and emerging market funds.
If global government bonds ended the year at current levels, they would register the biggest annual loss on a total returns basis since 1994 – when the Fed embarked on a tightening cycle that took interest rates from 3 percent to 6 percent in early 1995 – and the second-largest loss in 30 years, BAML said.