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Emerging-market stock funds lose $8.9 bln in global stock rout - extended

Withdrawals from emerging-market equity funds were a record $8.9 billion last week during a global stock market selloff, according to figures from Emerging Portfolio Fund Research Inc.

The amount was the highest since the Cambridge, Massachusetts-based research company started tracking flows in 2000 and represented about 2.7% of the funds' total assets, Brad Durham, managing director of the firm, wrote in an e-mail. About $2 billion of the outflows were from China funds. The previous record for emerging-market outflows was $5 billion in the five days ended June 14, 2006, as concern that higher borrowing costs would slow economic growth sparked a global equity slump.

Emerging Portfolio Fund Research Inc. tracks 15,000 funds with $7 trillion in assets, according to its Web site. Investors withdrew $3.85 billion from European equity funds last week, the most since February 2003. US funds had a smaller outflow, at $1.7 billion. The Morgan Stanley Capital International Emerging Markets Index tumbled 10% in the five days ended March 5. The sell-off, triggered by a plunge in Chinese equities and disappointing US economic data, wiped more than $3.3 trillion from stock market values worldwide.

Members of the Emerging Markets index traded at an average of 15.9 times their current profits on February 26, the highest multiple in almost three years. The price-earnings ratio had fallen to 14.2 by the end of the market plunge, data compiled by Bloomberg show. „The rout was largely a valuation call,” said Chakri Lokapriya, who manages $425 million of stocks in Brazil, Russia, India and China at BNP Paribas Asset Management UK Ltd. In London. „Concerns about the US economy slowing down were blown out of proportion.”

MSCI's Emerging Markets index has rallied 4.7% in the past four days. „A significant amount of investor exuberance was shaken out of global markets,” Durham wrote. The declines „have cleared the way for buyers to move in at better valuations. As ugly as these flows are, I see it as a positive development.” (Bloomberg)