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FX & IR EM Strategy Summary

Core Content

This document provides an overview of the recent trends in foreign investment flows into emerging market (EM) equities and bonds, with a focus on Asia, CEEMEA, and Latin America (LATAM). It also includes details on FX reserve changes and data sources, along with important disclosures.

Main Points

Emerging Market Bond Flows

• Overall: Net outflows into EM bond funds continued, with a net outflow of approximately USD 826mn for the week ending March 19, 2014. This includes USD 464mn in hard currency bond funds and USD 344mn in local currency bond funds.
• Asia: Foreign bond flows were mixed. India saw its first negative week since Feb 25, with foreigners selling Indian bonds. Thailand showed slight positive flows, while Indonesia and Korea continued to attract bond inflows at a slower pace.
• CEEMEA: Non-residents experienced outflows from TURKGBs and HGBs, but SAGBs saw inflows. This brought the month-to-date outflows for Turkey to USD 1.3bn.
• LATAM: Mexico's foreign participation rate peaked at 42.31% on March 3rd, but it has since decreased to 41.83%. Other LATAM countries showed mixed results, with Brazil and Colombia having varied inflows and outflows.

Emerging Market Equity Flows

• Asia: Equity inflows were moderate, with Korea experiencing large outflows. Indonesia and India saw increased equity inflows, while other parts of the region saw moderation.
• CEEMEA: Equity flows were mixed, with some countries experiencing inflows and others outflows.
• LATAM: Equity flows were also mixed, with Brazil, Mexico, and Colombia showing varying degrees of inflow and outflow.

Key Information

FX Reserve Accumulation

• Asia: FX reserves showed a moderate accumulation trend.
• CEEMEA: FX reserves also showed mixed changes, with some countries experiencing increases and others decreases.
• LATAM: FX reserves showed varied changes, with some countries showing a decline.

Data Sources and Notes

• Data for equity and bond flows comes from EPFR, BNP Paribas, and local stock exchanges.
• There are caveats for data accuracy and coverage:
  • Korea: Daily data refers to "net purchases" and does not account for redemptions.
  • India: Daily data is based on SEBI auctions and may not reflect actual cross-border flows.
  • Thailand: Data only covers government bonds, not bills or corporate bonds.
  • Indonesia: Covers all government bonds, but not SBI bills and corporate bonds.
  • Philippines: Covers all government bonds and equity inflows, but no breakdown between the two.
  • Mexico: Foreign participation rate peaked at 42.31% on March 3rd but has since decreased.
  • Other countries: Data is sourced from local custodians and exchanges, with variations in coverage and accuracy.

Contacts

• EM Strategy Contacts:

  • Bartosz Pawlowski - Global Head of EM Strategy (London)
  • Piotr Chwiejczak - FX & IR CEEMEA Strategist (London)
  • Dina Ahmad - FX & IR CEEMEA Strategist (London)
  • Stanislav Petrov - FX & IR CEEMEA Strategist (London)
  • Erkin Isik - FX & IR CEEMEA Strategist (Istanbul)
  • Mirza Baig - Head of FX & IR Asia Strategy (Singapore)
  • Rohit K Garg - FX & IR Asia Strategy (Singapore)
  • Jasmine Poh - FX & IR Asia Strategy (Singapore)
  • Yii Hui Wong - FX & IR Asia Strategy (Singapore)
  • Jennifer Kusuma - FX & IR Asia Strategy (Singapore)
  • Gabriel Gersztein - Head FX & IR Latam Strategy (Sao Paulo)
  • Thiago Alday - FX & IR Latam Strategist (Sao Paulo)
  • James Z Hao - FX & IR Latam Strategist (New York)

• Production and Distribution Contact:

  • Diana Seifert - Foreign Exchange, London (Email: Diana.seifert@uk.bnpparibas.com)

Important Disclosures

• This document is a marketing communication and not independent investment research.
• It may be subject to conflicts of interest due to interactions with sales and trading.
• The information and opinions are based on public sources and not guaranteed to be accurate, complete, or up to date.
• No liability is accepted for any loss arising from reliance on the material.
• The report is non-independent and not intended for retail clients.
• It is only for professional clients in certain European Economic Area countries.
• It is non-objective research and approved for publication in the United Kingdom and France.
• The report is subject to legal restrictions in various regions, including the United States, Israel, Japan, Hong Kong, and Australia.