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Investors keep pinning their hopes on emerging-market stock funds

November 29, 2010 |  3:37 pm

There are investment trouble spots all over the globe --from the turmoil in Ireland to the latest conflict  between North and South Korea.

But stock investors don’t seem worried about historically risky emerging markets –- and they’re pouring in cash at a record pace.

Investors stuffed a net $2.4 billion into developing-market equity funds last week, according to tracking firm Emerging Portfolio Fund Research Inc. That brings this year’s total to $84.3 billion, topping the $83.3 billion that flowed in during all of 2009.

The popular iShares MSCI Emerging Markets exchange-traded fund is up 8.8% in price year to date, compared with 6.5% for the U.S. Standard & Poor's 500 index. But the emerging-market fund is down 7.1% from its 2010 peak reached Nov. 4, while the S&P 500 is off 3.1% from its high reached Nov. 5.

Investors did worry about one emerging-market sector last week: fixed income. In a nod to worries over Ireland’s financial troubles and the risk that governmental debt problems could spread to Portugal or Spain, investors pulled money out of emerging-market bond funds, ending a string of 25 weeks of net inflows, according to EPFR.

Also, municipal-bond funds fell hard for a second straight week, losing a net $1.8 billion, as some investors pulled cash after the recent jump in yields and drop in muni bond values.

-- Walter Hamilton

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