Equities’ Great Equalizer Grab
Equity inflows just short of $50 billion caught up with debt funds’ $55 billion tilted toward hard currency, according to final EPFR data as the MSCI likewise ended with a 15 percent spurt in contrast with single-digit performance most of the year. Even though economic and earnings growth may be flat in 2013 overdue asset rotation favors additional stock exposure which may lift the lagging frontier as well as core universe. Among the constituent groups the diversified global slot was the big winner accounting for virtually all the net total with $5 billion also put in Asia offset by Latin America and EMEA outflows. In the developed world only Japan was positive at $7 billion as $80 billion fled the category. Among individual countries China led with $8 billion, while $1.5 billion went into Brazil, Korea and Russia combined. Mexico was the Latam standout and Africa got its entire $60 million in the last quarter. The BRIC theme shed $2.2 billion as the CIVITS and MIST successor acronyms along with frontier destinations took in roughly the same amount. The Middle East was again shunned with the Arab Spring’s aftershocks and festering geopolitical confrontations, although Egypt reappeared on the horizon with a 45 percent retracement of 2011’s collapse. Commodity, financial and consumer goods companies were popular, unlike energy and utility listings. As opposed to the mixed equity picture all bond classifications gained for $475 billion in total inflows. Both EM sovereigns and corporates set records, and local currency preference reasserted at year-end as central banks in the US, Europe and Japan extended monetary stimulus programs. Throughout 2012 exchange-traded ETFs absorbed a greater chunk of activity and now represent over half the equity space, while consistent institutional appetite compensated for retail wavering in both classes.
In the main MSCI markets only Brazil and the Czech Republic were down while the other Mideast member Morocco was at the bottom of the heap with a 15 percent loss. In Asia the Philippines was the surprise leader with a 45 percent jump, followed by Asean counterpart Thailand at 30 percent. India was up 25 percent although EPFR’s commitment tally was negative. Colombia squeaked by Mexico in that region with a 30 percent advance despite liquidation of a major brokerage there which slowed trading. The joint Andean index rose half that level, with Chile’s 5 percent lackluster result acting as a drag. Turkey was the Europe and universe champion with a 60 percent surge with Poland’s 32 percent a distant second. Hungary, which rewarded global houses like Franklin Templeton betting big on local debt, also managed a 20 percent share uptick as the government bought back a stake in energy heavyweight Mol. The frontier index lagged with a 5 percent increase as half the markets tanked and Kenya and Nigeria topped the charts with a 55 percent spike. The outcome was triple JP Morgan’s EMBI as such dizzying numbers may soon spin portfolios in another direction.
