Investors pull out $2.1 bn from BRIC funds

Stock market volatility forced investors across the world to pull out five billion dollars from emerging market equity funds last week, including over two billion dollars from funds focused on four BRIC Markets.

China accounted for more than half of the total outflow from BRIC funds, while India, Russia and Brazil together shared the remainder, according to international fund tracking firm EPFR Global.

"With sub-prime and global credit fears being fuelled by almost daily news of fresh write-downs in the financial sector and evidence mounting that the US Economy will slow going into next year, investors retreated from equity funds during the second week of November and shifted to the relative safety of money market funds," EPFR said in its weekly report.

During the second week of November, emerging market equity funds reported a net outflow of 5.58 billion dollars, while those focused on developed Markets saw an outflow of 5.07 billion dollars.

Nearly all the outflow from the developed and emerging Markets appears to have been absorbed by the money market funds. According to EPFR, the money market funds recorded a net inflow of 10.1 billion dollars during the week, taking their total inflow since the beginning of August to 100 billion dollars.

"Money market funds currently offer two things that investors like. They are very liquid, which allows investors to move rapidly back into Markets where they see value, and most of them come with an implicit guarantee that you wont lose any money something that's very attractive in the current investment climate," EPFR Global Analyst Cameron Brandt said.

CII disputes growth claims of India

Contradicting the growth numbers given out by the government, industry body Confederation of Indian Industry (CII) has on 11th Nov claimed that 17 sectors have recorded negative growth in the first half of the current fiscal."It is a matter of concern that more than 50 per cent of the manufacturing sector has recorded either moderate or negative growth," said CII Industry Council Chairman Satish Kaura while releasing the ASCON Survey conducted by the chamber.
Contradicting the government's claim that only one of the 17 industry groups (based on two digit NIC classification) recorded negative growth in April-August 2007, the survey said 17 out of 91 sectors showed negative performance during the first half of the year(April-September).The survey attributed low growth in various segments of manufacturing to rising interest rates, reduced credit availability and a strong rupee.

The Free Trade Agreements (FTAs) signed by the government with some of the countries in the last two years too have adversely affected manufacturing sector performance, the survey said, adding, "automobile industry, including motorcycles and three-wheelers, are amongst the sectors in the negative sales growth category."

The CII-ASCON survey further revealed that cement, energy meter, ball and roller bearing, polymer, utility vehicles, refrigerators, rubber footwear, bus and truck tyre etc have shown moderate growth, while fertiliser, machine tools, capacitors, motorcycles, edible oil etc are in the negative growth category.The official Index of Industrial Production (IIP), however, had said that only metal products and parts (except machinery and equipment) showed negative growth during April-August 2007.

According to the CII ASCON survey, out of 91 sectors, 15 sectors reported excellent growth rate of more than 20 per cent, 22 sectors recorded high growth rate of 10-20 per cent, 37 sectors posted moderate growth rate of less than 10 per cent and 17 sectors reported negative growth.The percentage of sectors in excellent and high growth category declined, while that for the moderate and negative category increased over the period April 2007 to June 2007.

Scooters, mopeds, electric fans, sponge iron, circuit breakers and transformers were in the excellent growth category, while those in the high growth segment included asbestos, cement pig iron, power cables, industrial valves, textile machinery, transmission line towers, air conditioners and microwave ovens. As regards exports, the survey said, five sectors have shown excellent growth, five sectors revealed high growth, eight sectors registered moderate growth and five sectors registered fall in exports.

Exports of cement, ceramics, mopeds and rubber goods fell during the first six months of the current fiscal, it added.Machine tools, air-conditioners and motorcycles registered excellent growth performance, while those in the high growth category included vehicles, three-wheelers, industrial valves and cold rolled steel, the survey said.