The Hindu Business Line : Redemptions in emerging markets expected: Morningstar

Mr Arijit Dutta, Mutual Fund Analyst at Morningstar Inc, expects redemptions in most emerging markets. Mr Dutta says that though valuations have been stretched, there will be no change in the long-term story.

He further adds that it's the best time to buy quality stocks.

Excerpts from CNBC - TV18's exclusive interview with Mr Arijit Dutta:

Have there been any large-scale redemption from the emerging market funds over the last 15 years?

I just heard a rough estimate of around $600 million was left in just 2-3 days after Black Monday.

But we have not yet received the cash flows for the month of May from mutual funds. I do not doubt that there has been some redemption.

Have you been able to quantify which regions have lost the highest amount of money?

The fund cash flows are reported at the end of the month, though we will have a better idea towards the end of May. It is hard to isolate the effect from any single country because the largest groups of funds are diversified in emerging market funds.

So, we are expecting to see redemptions from most emerging markets.

But it could be hard to ascribe portions of those redemptions to individual countries.

Is there likely to be more outflows or did it get stemmed in from what happened in the past two weeks? Will the redemption pressures ease off now?

It does seem to have eased of a bit. The money managers do not seem to be panicking.

Based on the sheer amount of cash that had flown in, a lot of people were probably not surprised to see this kind of correction.

But I do not think the longer-term story has changed a whole lot.

In some cases, the valuations may have got disconnected from the ground reality a little bit.

In the last 3-4 days, do you have any anecdotal evidence that the sell-off may have eased off a little bit from some of the emerging markets?

From what managers have been saying, it seems like they would rotate some of the stocks that had been discovered by everybody and so valuations have skyrocketed.

They wanted to sell those and seek other opportunities but not necessarily ditch the entire market, like India or Russia.

Some managers have said that this may be a time to focus on buying quality stocks.

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