Are emerging markets really suffering from outflows?

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Headlines in the recent months claiming that investors have been rushing for the exits in emerging markets are a great exaggeration, according to an expert.

"There's a view that investors are all bearish and getting out of emerging markets. That's primarily based on the [fund-tracking firm] EPFR data," Alberto Ades, co-head global economics and head of GEMs fixed income strategy at Bank of America Merrill Lynch said at a press briefing on Wednesday.

"It's a very small sample that's very biased to retail investors. If you find other data sources to expand that, what you find is no outflows," he said.

EPFR Global tracks the flow of money into and out of global mutual funds and exchange traded funds (ETFs) with $23.5 trillion in total assets. However, Ades says the universe tracked by the firm represents less than 10 percent of fixed-income assets under management globally.

There are three factors that debunk the claim that there has been an exodus from emerging markets, according to Ades.

Firstly, emerging market governments and companies have been issuing record levels of debt that has been met by solid demand.

(Read more: Rare bond default warning in China a good thing?)

Emerging market sovereign and corporate dollar bond issuance hit an all-time high of $450 billion in 2013, compared with $437 billion in the previous year, which was already a record, according to Reuters quoting ING. At the beginning of this year, Indonesia raised $4 billion from a sale of dollar-denominated bonds - the largest U.S. dollar bond in Asia since 1998.

Secondly, if you look at foreign participation in local currency sovereign bond markets, what you find is that it has stabilized since dipping in June of last year, Ades said, when concerns around emerging markets crisis reached fever pitch.

Foreign ownership in Indonesia's local currency bond market, for example, stood at 32.5 percent in December 2013, climbing from 31.9 percent in June, according to data from the Asian Development Bank.

(Read more: India and Indonesia: Not so bad after all?)

Finally, Ades said conversations with the leading global investment managers such as Fidelity and Aberdeen Asset Management suggest that while retail investors are leaving emerging markets, large institutional investors - such as pension funds, insurance companies and sovereign wealth funds - are still investing, albeit at a smaller clip than a year or two ago.

Emerging market outflows reach $18.6 billion

"The key takeaway is you need to broaden your source of information. [EPFR] data is good to know what retail investors are going - but retail investors own a small portion of the market - they are not the most strategic longer-term thinking part of the market," Ades said.

Manpreet Gill, head of fixed income currencies and commodities (FICC) investment strategy at Standard Chartered bank said Ades had a valid point in that investors must ultimately look at overall flows to get a complete picture because EPFR focuses on a specific fund universe.

(Read more: Hedge funds sit out the emerging market turmoil)

"I would argue that, if you look at measures such as total foreign ownership of bonds or equity inflows, we have seen periods of outflows in recent history. However the picture does differ country to country, and whether we are looking at equity or fixed income flows," he said.

"So yes, I wouldn't say there has been a massive exodus of capital from EMs. There was a concentration of that in the second and third quarter of last year," Gill added.

—By CNBC's Ansuya Harjani. Follow her on Twitter @Ansuya_H