The Hindu Business Line : Latam, Russia, African markets attract FII funds

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The Bovespa, the Brazilian stock exchange, is up more than seven per cent since January 1, 2008.
The Russian RTS has increased 2.61 per cent from the beginning of the year and the Mexico IPC CR has surged 6.45 per cent.
And the South African FTSE-JSE index has risen more than 24 per cent during this period.

Tania Kishore Jaleel

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Mumbai, June 5 FIIs have been pulling out their funds from India and China and investing in Latin Amercian countries, in Russia, and in a few African countries, say analysts.

According to analysts, Latin America, Egypt, South Africa and Russia are some of the markets that have attracted FII money in the recent few months.

“Most of the money is now going into commodities related markets, especially in the Latin American countries. Brazil has been the biggest beneficiary of this. If you see almost 50 per cent of Brazil’s market comprises commodities and oil, which is one of the main reasons it is doing well.

“Another country that has come into the limelight is Russia because of its oil,” said Mr Sridhar Sivaram, Executive Director, Morgan Stanley Mutual Fund.

The Bovespa, the Brazilian stock exchange, is up more than seven per cent since January 1, 2008.

The Russian RTS has increased 2.61 per cent from the beginning of the year and the Mexico IPC CR has surged 6.45 per cent.

And the South African FTSE-JSE index has risen more than 24 per cent during this period.

“The general trend seen now is that money is being put into Latin America dedicated funds, South Africa linked funds and even Egypt funds,” said Mr Dhruva Raj Chatterji, Research Analyst with Lipper, a Reuters company.

“India is attractive to our clients who are interested in information technology, engineering, and other projects that do not involve logistical movement of goods. However, the general perspective is that India needs to invest a large amount of funds in infrastructure. We generally caution clients from investing in India in cases which involve movement of goods,” said the senior manager of a US-based financial services firm.

In India, FIIs have been net sellers this year to the tune of Rs 16,416.50 crore, according to data available on SEBI Web site.

Soaring oil and food prices as well as rising inflation have forced the FIIs to reduce their exposure here, say market men.

Strong outflows

“FII outflows have been rather robust since January of this year,” said Mr Chatterji.

“Right now there is a lot of uncertainty looming around our markets, keeping the FIIs away. There is uncertainty regarding our macro-economic activities. The funds coming into India are minimal. FIIs seem to be putting their money into low beta markets.”

Aggressive selling by the FIIs has contributed a sharp fall in the domestic market. Since the beginning of the year, the Sensex has shed more than 22 per cent, while China’s Shanghai Composite has shed 36 per cent during the same period.

“China and India are high beta economies and they did take quiet a bit of a beating during the beginning of the year.

“China is one of the biggest underperforming markets this year; they have witnessed huge amounts of outflows from their economy by the FIIs,” said a Director of Research at a brokerage.