LONDON Investment funds dedicated to emerging market equities have posted record monthly outflows in June, shedding their entire year-to-date takings, banks said on Friday, citing data from EPFR Global.
It was the fifth straight week of outflow for equity funds which lost $5.6 billion in the week ended June 26, according to the Boston-based fund tracker which releases weekly data to clients late on Thursday.
The data showed that on a monthly basis, dedicated emerging equity funds suffered $19.86 billion in outflows in the four weeks of June, outstripping the previous record set in January 2008, when $18.7 billion fled the sector.
That leaves funds with a net 2013 outflow of $1.7 billion, banks said, compared to gains of $18.1 billion as of end-May.
The withdrawals coincide with huge losses on emerging assets since the U.S. Federal Reserve hinted in May that economic recovery may allow it to start unwinding stimulus.
The sell-off gathered pace at the end of the month when worries escalated over Chinese growth, taking emerging equity losses to over 13 percent in the April-June period .MSCIEF
"I'd see these latest outflows as healthy because we were concerned managers were not generally holding enough cash but in the past few weeks we have seen some cash-raising," said John-Paul Smith, head of emerging equity strategy at Deutsche Bank.
"The real test will come when it becomes obvious to investors there are severe structural problems in China," Smith said. "In the next few weeks money will flow out at a reduced pace but outflows will pick up again when we get a hiccup in China.
Emerging debt funds meanwhile saw $5.57 billion flee in the past week, the largest weekly outflow in history, data showed.
While year-to-date flows to emerging bond funds are in the black, the past week's losses represent a third of net 2013 inflows, according to EPFR data cited by banks. Returns are minus 6-8 percent, according to JPMorgan's benchmark indices.
Analysts pointed out however that hard currency bond funds are already in outflow territory in terms of year-to-date flows.
The losses were not confined to emerging markets however. Developed equity funds saw weekly outflows of $7.6 billion, with U.S. funds reporting the largest outflows of $4.8 billion though Japan reported inflows for the 28th week in a row.
Funds investing in high-yield bonds from developed markets posted record weekly outflows of $6.8 billion, the banks said.
(Reporting by Sujata Rao; editing by Stephen Nisbet)
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