Emerging Markets Exposure to External Debt Increases

Emerging market investors’ exposure to external debt has increased drastically, according to Dow Jones. Exposure climbed back into positive territory last month after having fallen to a record low level in September, according to a survey by JPMorgan. Inflows to the asset class have been strong since the beginning of the year, sustaining momentum from 2006. Asia-Pacific pension funds will make their first ever allocations to emerging market external debt in the next two months, JPMorgan notes. Strategic inflows were around $400 million in the first three weeks of January, down from $2.5 billion last December. However, mutual funds have posted $1.1 billion inflows in the last four weeks, the survey found. “According to this month’s survey, investors do still anticipate very strong institutional inflows in the first quarter, and this is expected to accelerate and should continue to underpin the market,” the report stated. The survey had 305 responses from investors managing $562 billion in emerging market fixed income and foreign exchange assets. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.