Investors pull out billions from emerging markets

BANGKOK, Mar 2 (AP): Investors disillusioned by the implosion of Wall Street titans, economic anemia in Japan, and a debt debacle in Europe have found abundant opportunities to grow wealth in industrialising economies like China and India. But now, as angry populations roil one Middle Eastern regime after the next, and discontent over escalating food prices and lagging living standards is heard elsewhere in the developing world, investors are moving staggering piles of cash out of emerging markets - and back into what they hope are the relatively stable havens of the US, Europe and Japan. That represents a major shift in sentiment since the financial crisis in 2008 upended conventional wisdom as to what is risky and what is safe as the US model of freewheeling capitalism teetered on the brink of collapse. Strenuous efforts by Europe to contain its debts, the ability of Japan's crucial export sector to weather a strengthening yen and strong corporate earnings in the US have played a big part in convincing investors that the outlook is pretty promising for advanced economies in 2011. According to fund tracker EPFR Global, fund managers and other investors yanked $5.45 billion from emerging markets funds in China, India, Brazil and elsewhere in the second week of February and placed it inequity funds of advanced economies - their biggest weekly inflow in more than 30 months. Developed market funds recorded their seventh straight week of inflows in mid-February - with European equity fund flows hitting 41-week highs. So far this year, investors have committed $47 billion to US, European, Japanese and global equity funds - $29 billion of it into the US alone. Meanwhile, investors have pulled out over 20 per cent of the $95 billion they parked in emerging markets during 2010 since mid-January, EPFR said. Since the beginning of the year, outflows totalled $1 billion from mainland Chinese equity markets alone. "Investors are, for the first time since 2007, seeing more opportunity in developed market equities than in emerging markets," said EPFR managing director Brad Durham. "The underperformance of developed markets last year, which has made valuations more appealing, and expectations of a return to faster paced growth in the US, Europe and Japan are the main drivers of this shift." The shift from emerging markets and into developed ones has been keenly felt in some key stock markets since the beginning of the year. The Dow Jones industrial average is up 4.1 per cent, Japan's Nikkei 225 is up 5.1 per cent, and Germany's DAX rose about 4.5 per cent. France's CAC-40 is up a whopping 6.9 per cent, while Britain's FTSE 100, a relative laggard, was up slightly under 1 per cent. Meanwhile, India's Sensex has slid 10 per cent, and Brazil's Bovespa is down 4.4 per cent. Indonesia's SE Composite Index has dropped 5.1 per cent. Vietnam's Ho Chi Minh index is down 3.8 per cent - wiping out some small investors hoping to strike it rich.