By Chua Kong Ho and David Yong Dec. 29 (Bloomberg) -- Emerging-market equity funds inflows tripled last week as the outlook improved for developing-nation exporters, EPFR Global said. The funds attracted $1.7 billion in the week ended Dec. 23 from $571.4 million in the previous week, EPFR said in a statement. That added to a record $80.3 billion of investments in emerging-market stock funds so far this year, compared with outflows of $48 billion in the same period in 2008, EPFR said. The MSCI Emerging Markets Index has rallied 73 percent this year, set for its best annual performance. Developing nations were the 10 best-performing markets this year as stimulus measures from China to Brazil helped bolster a recovery in economic growth. The gauge slid 0.1 percent to 979.98 at 7:03 p.m. in Singapore, snapping a five-day advance. This year’s inflows are “way off the charts,” Brad Durham, managing director at the Cambridge, Massachusetts-based EPFR, said in a Bloomberg Television interview today. “There will be some vulnerability in the first part of the year, just given that emerging market indices have performed so strongly.” The Shanghai Composite Index added 0.7 percent to a two- week high, and the Bombay Stock Exchange’s Sensitive Index advanced for a fourth day, its longest winning streak in seven weeks. Oil Producing Nations Oil producing nations also gained among emerging market stocks, with Abu Dhabi’s ADX General Index advancing 0.5 percent, the Nigerian Stock Exchange All Share Index rising 0.7 percent and Oman’s MSM 30 Index climbing 1.6 percent. Russia’s Micex Index fell less than 0.1 percent. Investors may add more money into emerging-market funds in 2010 as they look for earnings per share growth of between 28 percent and 40 percent, he said. Funds investing in China took in $153 million in the week ended Dec. 23, while those that focus on all the so-called BRIC nations of Brazil, Russia, India and China received $451 million, according to the statement. Flows into global emerging-market equity funds surged as the outlook for exporters in emerging markets improved with “better data” from the U.S. economy and as the U.S. Federal Reserve kept interest rates on hold, EPFR said. Emerging-market bond funds attracted $369 million of inflows last week, EPFR said, taking the tally to more than $8 billion this year. The record for this fund group was set in 2005 when they absorbed $9.7 billion, according to data compiled by fund tracker. Yield Premiums Investors demanded a yield premium of 2.76 percentage points over U.S. Treasuries to buy emerging-market sovereign debt, according to JPMorgan Chase & Co.’s EMBI+ Index. The spread fell for a third day to the least since July 2008. Dollar-denominated bonds sold by developing nations handed investors a 26 percent return so far this year versus a 9.7 percent loss in 2008, the most since 2003, according to JPMorgan’s EMBI+ Composite Index. China said Dec. 25 its economy grew faster than it estimated so far this year, and also raised its 2008 growth to 9.6 percent from 9 percent. South Korea’s Kospi index may rise as much as 20 percent in the first half as exporters benefit from recovering demand in developed nations, Mirae Asset Securities Co. said today. “Next year, you can expect demand from advanced economies, led by the U.S. and European Union, to be a catalyst for exporters such as technology companies,” Sean SY Hwang, head of Korea equity research at Mirae, the country’s biggest seller of mutual funds, said in an interview in Seoul. Spending by U.S. consumers increased in November, the sixth time in seven months, government data showed last week. The Federal Reserve repeated a pledge on Dec. 16 to keep interest rates “exceptionally low” for an “extended period” and said the economy is strengthening. U.S. stock funds took in $11.1 billion last week, the most since June 2008, according to EPFR. To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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