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FX & IR EM STRATEGY Summary

Core Content

This document provides a summary of the latest trends in foreign investment flows into emerging markets (EM) across equity, bond, and foreign exchange (FX) markets, with a focus on Asia, CEEMEA, and Latin America (LATAM) as of 24 February 2014. It is a marketing communication and classified as non-independent research, indicating that it may not be an exhaustive analysis and is subject to potential conflicts of interest.

Main Points

Equity Flows

• Overall: EM equity flows have shown improvement, with the most significant inflows in Taiwan, Indonesia, and India.
• Thailand: Slight equity outflows observed last week and month-to-date.
• Charts: Multiple charts show the trend of equity flows over time, highlighting both inflows and outflows across different EM countries.

Bond Flows

• Asia: Indonesia attracted USD 468 million in bond inflows, the largest since November 28, 2013. India and Korea saw moderate inflows, while Thailand and the Philippines had weak bond flows.
• CEEMEA: Hungary experienced four consecutive weeks of outflows from local debt, though there was renewed interest in HGBs in the latter part of the week. Turkey saw a USD 0.2 billion increase in foreign bond holdings despite a USD 0.3 billion decline in repos.
• LATAM: Mexico's Moody's upgrade spurred inflows, with foreign ownership of Mbono reaching 41.78% of total domestic debt. Mexico's FX reserves increased by USD 2.99 billion in January, driven by Pemex inflows.

FX Reserve Accumulation

• Asia: FX reserves showed positive changes, with notable increases in countries like India and Malaysia.
• CEEMEA: FX reserves in Turkey and South Africa also showed positive trends.
• LATAM: Mexico's FX reserves increased significantly, while Brazil and Colombia had mixed results.

Key Information

Asia

• Indonesia: Bond inflows of USD 468 million last week, the highest since November 28, 2013, following a change in NDF fixing methodology.
• India and Korea: Moderate bond inflows.
• Thailand and Philippines: Weak bond flows.
• FX Reserves: Positive changes noted in several countries, with FX reserves in India and Malaysia showing strong growth.

CEEMEA

• Hungary: Four consecutive weeks of outflows, but renewed interest in HGBs.
• Turkey: Foreign bond holdings increased by USD 0.2 billion, despite a decline in repos.
• South Africa: FX reserves showed some positive changes.

LATAM

• Mexico: Moody's upgrade led to increased foreign bond holdings, with foreign ownership reaching 41.78%. FX reserves increased due to Pemex inflows.
• Brazil and Colombia: Mixed results in bond flows, with Brazil showing some positive trends and Colombia having a more stable flow.

Data Sources

• Equity Flows: BNP Paribas, Local stock exchanges, EPFR.
• Bond Flows: BNPP, CEIC, Bloomberg, local debt management offices.
• FX Reserves: BNP Paribas, central banks, and other financial institutions.

Notes on Data

• Korea: Daily data refers to "net purchases," not "net investment," and may overstate inflows.
• India: Daily data may not reflect actual cross-border flows due to timing of bond auctions.
• Thailand: Data covers only government bonds and not corporate or BoT bills.
• Indonesia: Covers all government bonds but not SBI bills or corporate bonds.
• Philippines: Data covers government bonds and equity inflows but does not provide a breakdown between the two.
• Daily vs Monthly Data: Monthly data is used to correct for the limitations of daily data.

Contacts

Disclaimer

• This document is a marketing communication and not independent investment research.
• It is subject to conflicts of interest and may not be relied upon as an exhaustive analysis.
• No liability is accepted for any losses resulting from reliance on the information.
• The information is based on public sources and may be subject to change.
• BNP Paribas may have financial interests in the mentioned issuers and may have provided the information to clients prior to publication.