EM Stocks See $12B Inflow from Passive Funds in April

Key Inflow Highlights

In April, passive long-only funds resumed investments into emerging market equities, injecting a substantial $12.0 billion, according to a Morgan Stanley report. This renewed interest was primarily directed towards Taiwan, Brazil, and China. In contrast, active foreign funds recorded a minor outflow of $0.7 billion during the same period.

Market Overview

Stock exchange data highlighted significant foreign capital movement, with foreigners purchasing $8.4 billion in Taiwanese equities and $22.4 billion in Japanese equities. South Korea also saw net purchases of $0.6 billion. However, India and Indonesia experienced outflows of $5.2 billion and $1.0 billion, respectively. Hedge funds notably increased their exposure to the Information Technology sector in Asia, pushing it to a historic high share of their portfolios since 2010.

Investor Portfolio Adjustments

Analysis of March data showed long-only investors increasing allocations to Brazil while reducing exposure to India and Korea. On a sector level, positions were added in Capital Goods, Energy, and Materials, while allocations to Semiconductors and Tech Hardware were decreased. Notably, Japan's allocation in global portfolios reached an equal-weight position for the first time in two decades.

Summary

The April data indicates a strong return of passive investment into emerging markets, with a clear preference for technology-driven economies like Taiwan. While some markets faced outflows, the overall trend points to renewed confidence, particularly in Asian IT and a rebalanced view on Japan.

FAQ

Q: Which countries saw the largest inflows in April?
A: Taiwan and Brazil led passive fund inflows into emerging markets, while Japan attracted the largest overall foreign purchases at $22.4 billion.

Q: What sector is attracting the most hedge fund investment in Asia?
A: The Information Technology sector drove nearly all net inflows from hedge funds, reaching a record high in their regional portfolios since 2010.

Source: Investing.com