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."