Great Graphic: Equity Flows DM >EM

This Great Graphic was posted on Business Insider, which got it from Bank of America, which relied on data from EPFR Global. It shows the cumulative capital flows into developed and emerging market equities funds since 2002.

The flow story, as one would expect, jives with the performance story we previously highlighted.  That must be one of the ironic stories of the year--the decoupling of flows and performance is taking place and it is to the benefit of the developed markets.

This may be a bit of an exaggeration.  US and Japanese equity funds account for the overwhelming part of inflows into DM funds.  And, while there has been some outflows from EM funds, compared to what has accumulated since the crisis, it has been quite modest.

This may understate the case.  The funds are still thought to be primarily a retail investment vehicle.  The data, also, does not include direct equity purchases,  by important participants, such a pension funds, insurers, hedge funds, and, according to reports, increasingly central bank.  

Lastly, typically cross border portfolio flows are dominated by debt instruments.  It would seem that there has been a bigger liquidation of emerging market investments in the fixed income space.  This, coupled with the adjustment of currency hedges and speculation may help explain the pressure on emerging market currencies.