Brazilian funds posted outflows last week,
echoing trends elsewhere in EM, where debt funds have suffered
post-crisis outflow records
Investors are pulling cash out of
Brazilian equity funds, echoing trends in other emerging market
asset classes such as debt funds, which have suffered
post-crisis outflow records.
Brazilian debt funds lost $213
million-equivalent last week, their highest outflows since
October 2011, while equity funds lost $531 million, according
to data from Itaú released Monday.
That echoed a broader trend in the global
markets: investors yanked $1.52 billion from emerging market
debt funds and $3.99 billion from EM equity funds in the week
to June 5, according to EPFR. LatAm equity funds lost $198
million, the data provider said.
Outflows from EM hard currency funds were
the highest since the second quarter of 2007, according to
EPFR. Cash left local currency funds for the first time since
the third quarter of 2012.
The sharp reversal in sentiment comes amid
volatile markets as investors reassess their perspective on US
Treasury yields, trying to judge when the Federal Reserve will
begin exiting quantitative easing and normalizing monetary
The uncertainty has squashed opportunities
for Latin American borrowers to tap debt markets.
"There’s been substantial EM
fixed-income outflows in the last two weeks, you could feel
that," said one LatAm syndicate banker. "Investors are raising
cash to fund redemptions."
A rise in US Treasuries of around 50bp in
May has already driven losses in investment portfolios, cutting
risk appetite among asset managers, said Aziz Sunderji,
emerging market corporate credit strategist at Barclays.
"In a world where you don’t
know the outlook two months ahead, you probably want to sit on
typical or higher than normal cash levels – and those
have been depleted by record-breaking issuance," he said.
EM debt lost 1.72% in the week ended June
6, for a year-to-date loss of 3.47%, according to Lipper. By
comparison, global income funds were down 0.19% during the
week, and are down 1.52% year-to-date. International income
funds were up 0.52% during the week, for a 2.85% loss
funds fell 2.76% during the week ended June 6, and are down
7.32% year-to-date, according to Lipper. EM equity funds were
down 2.82% during the week, to bring them to a year-to-date
gain of 2.63%. By comparison, global small and mid-cap funds
were down 1.65% on the week, and have earned 10.05%