U.S. investors pour out of SE Asian funds

U.S. investors pour out of SE Asian funds

NEW YORK (Reuter): The recent turbulence in Southeast Asian markets has exacted a sustained toll on the performance and net flows of mutual funds investing in the Asia-Pacific region, excluding Japan, analysts said.

Funds focused on the Southeast Asian region, which has been thrown into turmoil by concerns about the value of local currencies, have seen an unrelenting stream of redemptions since July, when Thailand devalued the baht, they said.

"Outflows from funds focused on the Pacific region, excluding Japan, began the week ending July 2 and have continued for nine consecutive weeks," said Robert Adler, president of fund tracking service AMG Data Services.

The latest data showed this sector saw $120 million in outflows for the week ended August 27, the highest level since outflows of $157 million for the week ended July 30, he said.

"These funds have done poorly and the more Southeast Asia exposure the fund has, the worse it has done," Bill Rocco, an analyst at Morningstar said.

Adler said: "Asian markets have suffered a negative performance of over two percent in each week ended August 13, August 20 and August 27. The $120 million in outflows certainly has to be linked to this negative performance."

Morningstar said for June and July, funds in the Pacific basin, excluding Japan, had total outflows of $500 million, amounting to a five percent withdrawal.

"These funds have been struggling all year," Rocco said.

While the stream of outflows -- amounting to about one percent of the assets AMG classified in this sector -- did not signify a panicky sell-off, Adler said it raised concerns about whether funds had the cash to pay the redemptions.

"Continued redemptions could force the sale of shares," he said.

But Carl Wittnebert, director of research at fund tracking firm Mutual Fund Trim Tabs, said on a short-term basis, its analysis showed funds aimed at the Pacific region, excluding Japan, saw small inflows for the three days ended August 28.

"The inflows amounted to 0.3 percent of assets, but the net asset value was off 5.7 percent in those three days," Wittnebert said. "You would expect people to watch that (NAV) closely and pull money left and right out of these funds, but that really has not happened."

Instead, for the two days ended Aug. 25, Mutual Fund Trim Tabs reported that this region saw outflows of about 2.2 percent of $1.5 billion in assets. NAV was roughly unchanged during this time, Wittnebert said.

"The crisis was well underway then," Wittnebert said. "These were pretty good outflows for a small category."

Trouble began when Thailand announced plans to float the baht on July 2, after speculative attacks on the currency.

The Thai government has sought financial support from the International Monetary Fund and other Asian countries, because of the baht's collapse and shrinking foreign reserves.

Thailand's neighbors were also punished, as fund managers determined that the group of regional economies shared many of the same problems, analysts said.

"Once Thailand pulled the plug on the baht, people started looking closely at Indonesia, Malaysia and the Philippines," Rocco said. "Even before Thailand devalued, money managers were looking at countries in the region with widening current account deficits and an overextended banking sector."