Emerging-Market Stock Funds Post Sixth Week of Inflows, Citigroup Says

Global emerging-market funds reported a sixth week of inflows as investor confidence in the global economy strengthened, Citigroup Inc. said.

Funds investing in developing-nation stocks took in $2.6 billion in the week ended Feb. 1, Citigroup analysts led by Markus Rosgen, wrote in a report dated today, citing data from fund researcher EPFR Global. China attracted the most inflows, according to the report.

“Investors are taking on more risk,” Yue Hin Pong, one of the Citigroup analysts cited in today’s report, wrote in an e- mail. “This was encouraged by the improved global macro data for December and easing credit crunch fears.”

Emerging-market stocks posted their best start to a year since 2001 after European countries agreed to tighter budget controls and as policy makers from Brazil to the Philippines cut borrowing costs to spur growth. The MSCI Emerging Markets Index (MXEF) climbed 11 percent last month, the biggest January increase in 11 years, following a 20 percent drop in 2011.

U.S. manufacturing grew the most since June, the Institute for Supply Management said on Feb. 1 and the U.K.’s factory gauge reached an eight-month high. India and China on Feb. 1 posted an improvement in output numbers, suggesting the world’s fastest-growing major economies are withstanding the impact of Europe’s sovereign-debt crisis.

Emerging markets will “perform very well” this year as inflation is no longer a problem, Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asian and emerging-market strategist, said at a press briefing in Manila on Jan. 31.
China Flows

The MSCI Emerging Markets Index lost 0.3 percent to 1,041.32 at 11:43 a.m. Singapore time. Companies in the index of developing companies trade at 10.4 times estimated earnings, less than the four-year average of 12, according to data compiled by Bloomberg.

China attracted $247 million in the latest week, according to Citigroup’s report. The official purchasing managers’ index increased to 50.5 from 50.3 in December, exceeding the median estimate in a Bloomberg News survey for a reading below the 50 level that divides expansion from contraction. A separate gauge from HSBC Holdings Plc and Markit Economics rose to 48.8. The data may have been distorted by a weeklong holiday.

The official PMI report suggests manufacturing “has stabilized somewhat due to supportive fiscal and monetary policies,” Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd., said on the day the data was released. “Stronger-than-expected PMI also provides solid evidence that a hard landing for China’s economy is very unlikely.”