European Capital Begins To Rush Into Emerging Markets

So far this year, the ECB and the BoJ's quantitative easing policy have not led to massive inflows of capital.

Instead, European Equity Fund redemptions rose to $6 billion 100 million this week, and Japanese ETF funds also face capital flight.

As Bank of America Merrill Lynch had previously reported,

In July, the fund managers' survey showed that the first time in the three years of the euro area came out of capital, and Japan was the first time in more than three years.

In the week of July 20th, the net flow of funds into emerging market bond funds hit a record high, the bank said.

Precisely, the net inflow of funds is US $4 billion 900 million.

The record highs recorded above two weeks ago were over $1 billion, indicating that the "Great Migration" of the world asset class predicted by BlackRock is accelerating rapidly.

Investors have flocked to emerging market bonds so fast that they have refreshed their highest record two weeks ago.

Meanwhile, in the same week, Mei Yin Mei Lin quoted data from EPFR Global, which reached $4 billion 700 million in the emerging market stock market, the highest level in 12 months.

In view of the comparison with the US debt

The curve shows that the real yield of emerging market sovereign debt is high.

Investors are ignoring the political risks exposed by the attempted coup in Turkey last week, even if investors bite their teeth and have to do so.

In view of the increasing growth of bond yields in developed markets, the global pursuit of yield is being launched. This part explains why the fund manager of BlackRock said that

The higher market will become the destination after the capital escapes from the low return market.

Negative yield bonds show that if investors hold bonds to maturity, they will surely lose money. However, some investors are willing to exchange for such a sense of security on the occasion of global turmoil.

These negative yield bonds allow other investors to take risks in emerging markets, thereby driving emerging market asset classes from a three year bear market.

So it is not difficult to understand why the following are the best performing part of the bonds since the June referendum in the United Kingdom: dollar bonds issued by Salvatore, Mongolia and Zambia.

The result of the referendum in Britain is a major factor contributing to the scarcity of yields.

The funds flowing into the emerging market equity funds are almost equal to the capital inflows to the bonds.

Earlier this week, Morgan Stanley analysts raised the rating of emerging market fixed income assets from "reduction" to "neutral", indicating that emerging markets are becoming "generals".

Analysts say that the fundamentals of emerging market economies are improving compared with developed markets, and that such asset classes can bring good returns.