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FX & IR EM STRATEGY Summary

Core Content

This document provides an overview of the flows into emerging market (EM) bond and equity funds as of 28 April 2014. It includes analysis of both regional and country-specific data, focusing on Asia, CEEMEA, and Latin America (LATAM). The report highlights the net inflows and outflows, trends in foreign ownership, and the impact of market conditions on investment flows.

Main Points

EM Flows Tracker (April 23rd)

• Bond Funds: Net inflows into EM bond funds were less than USD 200mn, with local currency funds experiencing an outflow of about USD 140mn.
• Equity Funds: Net inflows into EM equity funds were less than USD 500mn, with the majority going into Latam and GEM (Global Emerging Markets) funds.
• Asia: Continued to benefit from moderate equity inflows, though India saw a slowdown due to election anticipation. Bond flows were modest, but the upcoming government bond auctions are expected to show a clearer trend.
• Korea: Maintained the strongest momentum for combined portfolio inflows. Bond inflows now dominate equity inflows.
• Thailand: Showed a notable pick-up in inflows.
• Turkey: Experienced outflows in both foreign bond and equity holdings by USD 0.3bn. Foreign investors shifted to shorter maturity bonds.
• South Africa: Mixed flows were observed, but cumulative inflows into SAGBs (South African Government Bonds) reached over USD 1.7bn since February.

Equity Flows

• Chart 3: Latest equity inflows (USDmn) indicate varying levels of investment across EM countries.
• Chart 5: Weekly equity flows in all EM and Asia showed a continued outperformance of equities over bonds.
• Chart 7: Weekly equity flows in all EM and LATAM highlight the strong inflows into Brazil and Mexico.

Bond Flows

• Asia: Net bond inflows varied significantly across countries. Korea had strong inflows, while India and Indonesia experienced net selling, likely due to FX conversion.
• CEEMEA: Non-resident outflows were observed in Hungarian and Turkish local debt. South Africa had mixed flows, but cumulative inflows in SAGBs were positive.
• LATAM: Mexico and Brazil recorded positive inflows, while Colombia saw a redemption of USD 94mn. YtD (Year-to-Date) inflows into Colombia's bond markets decreased.

Key Information

Asia Bond Inflows (Recent Trends)

• KRW: Monthly net inflows of USD 3812mn.
• INR: Net outflows of USD 1700mn.
• THB: Net inflows of USD 1432mn.
• IDR: Net inflows of USD 1116mn.
• MYR: No data available.
• PHP: Net inflows of USD 156mn (YtD) compared to previous highs.

CEEMEA Bond Inflows (Recent Trends)

• TRY: Net inflows of USD 802mn.
• HUF: Net inflows of USD 384mn.
• ZAR: Net inflows of USD 246mn.
• PLN: No data available.

LATAM Bond Inflows (Recent Trends)

• MXN: Net inflows of USD 617mn.
• COP: Net inflows of USD 94mn.
• BRL: Net inflows of USD 553mn.

FX Reserve Accumulation

• Asia: FX reserves showed a monthly change with notable inflows in Korea, India, and Thailand.
• CEEMEA: FX reserves had mixed changes, with some countries showing positive inflows.
• LATAM: FX reserves showed varying levels of change, with Mexico and Brazil experiencing inflows.

Region-specific Analysis

Asia

• India: Moderate equity inflows, but bond flows were affected by FX conversion.
• Korea: Strong inflow momentum, with bond inflows surpassing equity.
• Thailand: Steady inflows into equity and bonds.
• Taiwan: Strong equity inflows.
• Philippines: Net inflows into debt and equity, though no asset class breakdown was provided.

CEEMEA

• Turkey: Outflows in both bond and equity holdings, with a shift towards shorter maturity bonds.
• South Africa: Mixed flows, but cumulative inflows into SAGBs were positive.
• Hungary: Outflows in local debt.

LATAM

• Brazil: Strong equity inflows, with a monthly total of USD 1.387bn.
• Mexico: Positive inflows into both equity and bond markets.
• Colombia: Redemption of USD 94mn, with YtD inflows reduced to USD 156mn.

Data Sources and Notes

• Equity Flows: Data sourced from local stock exchanges and Bloomberg.
• Bond Flows: Data sourced from various central banks and financial institutions.
• Notes on Data:
  • Daily equity flows are sourced from local stock exchanges.
  • Daily net debt flows are subject to caveats, including not accounting for redemptions.
  • Data on Thailand only covers government bonds.
  • Indonesia data does not include SBI bills and corporate bonds.
  • Philippines data does not provide a breakdown between debt and equity.

Contacts

• CEEMEA: Piotr Chwiejczak, Dina Ahmad, Erkin Isik
• Asia: Mirza Baig, Rohit K Garg, Jasmine Poh, Jennifer Kusuma
• LATAM: Gabriel Gersztein, Thiago Alday, James Z Hao

Disclaimer

• This document is non-independent marketing communication.
• It is not an exhaustive analysis and may be subject to conflicts of interest.
• The information is based on public sources and should not be relied upon as accurate or complete.
• No liability is accepted for any loss arising from the use of this report.
• The report is for professional clients only and not for retail clients.
• It is subject to legal restrictions in various jurisdictions.