EM equity funds see $1.2B inflow, managers favor banks and financial services

Investing.com -- Emerging Market (EM) equity funds saw inflows of $1.2 billion in the week ending May 28, 2025, with notable contributions from China, Taiwan, Brazil, and Mexico.

This influx was partially counterbalanced by outflows from Korea and Thailand. The largest inflow was observed in China with $1.2 billion, followed by Taiwan with $0.8 billion, Brazil with $0.4 billion, and Mexico with $0.2 billion. The outflows were led by Korea with $0.4 billion and Thailand with $0.1 billion.

In April, Global Emerging Market (GEM) long-only managers shifted their strategy, reducing their investments in Semiconductors (Semis) and increasing their holdings in Banks and Financial Services. This move was reflected at the country level, where managers increased their investments in Brazil and India, while reducing their positions in China, Taiwan, and Korea.

According to data from EPFR, in April 2025, GEM long-only managers increased their overweight positions in Brazil and reduced their underweight positions in India. This was funded by increasing underweight positions in China and Taiwan and reducing overweight positions in Korea.

In terms of industry groups and individual stocks in April, GEM investors added to their positions in Banks and Financial Services. This was funded by trimming their overweight positions in Semis.

At the individual stock level, investors reduced their underweight positions in Xiaomi (OTC:XIACF) and increased their overweight positions in Itau Unibanco. This was funded by trimming overweight positions in TSMC, Tencent (HK:0700), and SK Hynix.

In a broader perspective, there has been a rotation among US/Europe-domiciled Exchange-Traded Funds (ETFs) over the past three months. Flows have been moving from US equities to European equities and Gold.

In contrast, Japanese equities have experienced foreign cash inflows since early April 2025. However, a significant sell-off of domestic ETFs has occurred in the past two weeks.

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