According to Morningstar’s freshest fund flow data, investors sent a net €4.6bn into emerging market debt funds in May, the highest amount since January 2013. The bulk of the inflows went into bonds denominated in dollars, while local currency bonds saw positive inflows of €1.74bn. The latter category was especially hit hard by last year’s massive outflows, and total assets invested in the asset class are still standing some €12.3bn lower than a year ago.
Emerging market bonds were the most popular investment category in terms of net inflows in May, followed by multi-asset funds which enjoyed net inflows of more than €3bn. Emerging markets equities were the most favoured equity category with net inflows of €1.47bn, recording a second straight month of net inflows for the first time since April 2013.
Fund flows follow sentiment data
The net fund flow figures are quite in line with Expert Investor Europe’s sentiment data, though fund selectors on the continent still show some restraint when it comes to investing in emerging market debt.
Graph: Pan-European EM corporate bonds sentiment
Across Europe, appetite for the asset class has shown a remarkable turnaround during the last couple of months, especially if compared to all other bonds categories.
Emerging markets equities, for their part, are the most popular equity category now. Just a few months ago, both emerging markets bonds and equities were still highly unpopular with fund selectors.
Graph: Pan-European EM equities sentiment