Emerging markets debt and equity funds report first outflows in months

This week saw the first outflows from emerging market debt and equity funds since October 2018, Bank of America Merrill Lynch strategists said on Friday, citing EPFR data. Emerging market stocks have had a strong run since the end of 2018 and pulled inflows of $18 billion in 2019 so far, but were named the "most crowded" trade in a BAML survey last week, which may be a bad omen. But in the week to February 20, EM equity funds saw $0.5 billion outflows and EM debt funds lost $39 million.

Overall flows showed a creeping risk aversion from investors facing a slowing global economy, critical trade talks between the U.S. and China, and sliding earnings expectations. Bond funds drew inflows of $4.6 billion while equity funds lost $12.7 billion, BAML strategists said.

Data showed U.S. equity funds suffered a 12th straight week of outflows, with investors pulling $4.3 billion from the region. Japanese equity funds saw $1.1 billion outflows, their biggest in six months, while $3.9 billion left European equity funds. Credit drew inflows with $2.3 billion going into investment-grade bond funds and $0.5 billion flowing into high-yield bond funds.