Last night we got fresh EM fund flow data in the face of what has been a bit of a rout in EM equities. 

Emerging marketsAccording to the EPFR who does this fine work on compiling the numbers, EM (EEM, quote) fund flows through May 27th were up a whopping $4.1Bn or the best number seen since July of ’14.  The problem with these numbers are that they circle back to China as the primary source of the funds and therefore take you back to a domain fear theme of the week – China equities are in a bubble (yes/no?)

Chinese equities saw inflows of $4.6Bn or 1.43% of their total AUM.  EM ex-China actually saw outflows last week of a few hundred million Dollars.

YTD EM has seen an overall outflow of $16Bn in AUM.  China (FXI, quote)  however is $15Bn of the total $16bn thus this week may just be evening the score. Meanwhile India is up over $6Bn in find flows and therefore is dominating as the overweight play in EM allocation.  This is some also to consider when looking at India performance since the highs in February when most of these funds had been digested.  South Korea is another big laggard with -$2Bn in flows so far YTD.

Conclusion: Chinese equities surge may just be compensating for some of the outflows seen.  India could be vulnerable.  We remain OW So Korea.

chart 6

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