$1.08 bn FII inflow in Sept largest among emerging markets

Stock valuations may be getting dearer by the minute but foreign funds don't seem to be worried a wee bit. Foreign institutional investors (FIIs) ploughed in $1.08 billion in September alone, the largest inflow into major emerging markets in a month.

Interestingly, FIIs pulled money out of Korea and Taiwan. While Korea saw net outflows of $890 million during the month, outflows from Taiwan was much less at $317. Thailand saw the fourth consecutive positive flow with $316 during the month. Indonesia and Philippines also saw marginal inflows.

Fund managers note that the fundamental story of India Inc remains attractive and with 16-20 per cent earnings growth estimated going forward, valuations at current levels continue to be attractive.

The Sensex is currently ruling at a P/E of 18x. Even apart from India, foreign investors seem to be keeping faith in the emerging markets worldwide.

According to data sourced from EPFR (Emerging Portfolio Fund Research), emerging market equity and Japan equity funds posted their strongest weekly inflows year to date in the week ending September 28.

Emerging market equity and Japan equity funds posted their strongest weekly inflows from investors year to date in the week ending September 28.

Meanwhile, flows into international funds continued to build up and investors returned to making contributions to the US equity funds for the first time in eight weeks.

There was a bigger inflow into emerging market and global bond funds that in previous weeks. The combined emerging fund group inflows amounted to a net $1.49 billion during the week, which brought the year to date inflow total to $12.78 billion.

Emerging market equity funds have returned nearly 8 per cent on an average over the past four weeks, though they lagged compared with Latin American equity funds which were at the top with 14 per cent return during this time.

GEM (Global Emerging Market) equity Funds net inflows during the week amounted to $584.1 million, the best weekly inflow this year in dollar terms.

In percentage of total asset terms, it was the strongest inflow since mid-July. However, EPFR notes that fund flows have slowed somewhat into the Asia ex-Japan equity Funds, which took in $213.5 million for the week.