ING IM has reduced its emerging market asset exposure as equity fund flows into the region turned negative for the first time.
The firm will be reducing its allocation to equity, bond and currency markets, citing a widening risk gap between the BRIC and US market.
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Unimproved macro policies in the countries with the most negative current account dynamics and a shortfall in economic data and earnings momentum statistics in comparison to developed markets were also said to be motivating factors for the move.
The firm has reduced its emerging markets exposure from overweight to neutral, a contrarian view given that equity fund flows and investor surveys are generally overweight. ING IM said this makes the markets vulnerable to bad news.
According to Valentijn van Nieuwenhuijzen, head of strategy at ING IM, larger emerging market current account deficits have been financed largely on debt flows, but as the situation in the developed markets improve, these flows are likely to fall.
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