Expect to see emerging markets funds bring in over $30 billion in the current quarter, easily cracking the old 2006 record flows into this asset class. This is still a bullish sign.
As the world’s capital keeps pumping into emerging markets, we have already seen $3.4 billion come into funds that give investors a way to access these robust economies. At that rate, this quarter will easily outpace any other three months on record — assuming, of course, that the trend continues for awhile.
While some say strong flows become a negative technical indicator if they continue “too long,” the fact is that they do not seem to have gone on too long yet. In fact, the idea that too much money crowding into an asset class is only bearish confirmation if sentiment is bearish already — otherwise, it simply indicates that investors are still piling into these funds, which we would ordinarily call a “bull market.”
Latin funds are hotter than they have been since October, outpacing Asia-dedicated funds last week by a significant margin and drawing in more than twice as many dollars as even the hot Russia driven CEE/EMEA group.
But the king is still the “emerging markets” asset class itself. Global funds like EEM took in half of all emerging markets flows last week — a total of $1.7 billion in net allocations.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.