Emerging Market Equity Funds Favour South Korea And South Africa In 2005

by Phillip Morton, Investors Offshore.com

10 January 2005

South Korea and South Africa have replaced India, Malaysia and Taiwan as the emerging markets of choice for global equity fund managers, according to Boston-based fund tracker Emerging Portfolio Fund Research.

EPFR, which tracks funds with assets totalling some $260 billion, believes that 2005 has ushered in a slight shift in sentiment towards South Korea despite the market’s lacklustre performance there last year, while South Africa has “leapfrogged” Brazil and Taiwan to become the second most favoured emerging market.

Meanwhile, muted third quarter earnings, combined with rising interest rates and higher energy prices has meant fund managers “significantly” reducing exposure to India.

Thailand has also suffered a drop in sentiment as a result of political unrest sparked by Islamic insurgents in the country’s south, giving some foreign investors the jitters, the firm reported.

Elsewhere, global equity funds bought $1.3 billion of stocks in the Emerging Europe, Africa and Middle East region in 2004, with particularly strong buying interest seen in Russia, South Africa and especially Israel, which appears to have benfited from renewed optimism in the wake of Yasser Arafat's death.

In Latin America, equity funds were net sellers last year according to EFPR, which noted a cut in allocations to Mexico to a record low of 6.5%.

Recommended