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EM Flows Tracker Summary (11 August 2014)

Core Content

This document provides an analysis of the flow of capital in Emerging Markets (EM) across equity and bond markets, as well as FX reserve changes in the region. It highlights the contrasting trends between bond and equity flows, and provides region-specific insights into Asia, CEEMEA, and LATAM.

Main Points

Equity Flows

• EM Equity Inflows: EPFR data for the week ending 6 August showed a significant inflow into EM equities, while EM bond funds experienced outflows.
• Bond Fund Outflows: EM bond funds reported a net outflow of USD 643mn, marking the first net outflow since April 2014.
  • Hard Currency Bond Funds: Recorded a net outflow of USD 750mn.
  • Local Currency Funds: Experienced a net outflow of USD 127mn.
  • Blended Funds: Continued to attract inflows of USD 234mn.
• LATAM Equity Inflows: Brazil and Mexico saw equity inflows of USD 132mn and USD 47mn respectively.
• Mexico Foreign Participation: Foreign participation in the Mexican equity market reached a new high of 37.3% in July, up from 36.9% in June.
• Colombia Foreign Inflows: Inflows from foreigners in July were significantly higher than the year-to-date (YtD) monthly average, reaching 4078bn COP, and the foreign participation rate increased by almost 2 percentage points to 12.5%.
• Asia Equity Outflows: The region experienced slight outflows in equity markets, led by Taiwan, with a net outflow of USD 44mn.

Bond Flows

• Asia Bond Outflows: Portfolio flows turned negative in Asia, led by Thai and Indian bond outflows of USD 927mn and USD 554mn respectively.
  • Korea: Inflows into Korean bonds were positive, but equity flows were slightly negative.
  • Indonesia: Foreigners bought USD 1.64bn of Indonesian bonds in July, increasing foreign ownership to a record high of 36.3%.
• LATAM Bond Outflows: LatAm bond funds reported their first weekly outflow since March, at USD -378mn.
• Bond Ownership Trends:
  • Korea: Foreign ownership of Korean bonds stood at 37.3% in July, with a significant portion of ownership in government bonds.
  • Indonesia: Foreign ownership of Indonesian bonds reached 36.3% in July.
  • Thailand: Foreign ownership of Thai government bonds was at 16.1% in July.
  • Colombia: Foreign participation rate reached 12.5% in July.
  • Mexico: Foreign participation rate reached 37.3% in July.
  • Turkey: Foreign bond holdings declined slightly, but investors rolled over maturing debt.

FX Reserves

• Asia FX Reserves: Hong Kong reported the largest increase in FX reserves in July among its Asian peers, around USD 7.13bn, due to interventions to defend the peg. India, Indonesia, Korea, and Taiwan also saw increases in FX reserves, while Singapore reported a decline.
• CEEMEA FX Reserves: Various countries in the region, including Turkey, South Africa, and Hungary, reported FX reserve increases, though data was limited in some cases.
• LATAM FX Reserves: FX reserves in Latin America were generally stable or increasing, with some countries reporting notable changes.

Key Information

Asia

• Bond Flows: Negative for the week, driven by Thai and Indian outflows.
• Equity Flows: Slight outflow led by Taiwan.
• Foreign Participation:
  • Indonesia's foreign ownership of bonds reached a record high of 36.3% in July.
  • Mexico's foreign participation rate reached 37.3% in July.
• FX Reserves: Hong Kong, India, Indonesia, Korea, and Taiwan reported increases, while Singapore reported a decline.

CEEMEA

• Turkey: Foreign bond holdings fell slightly, but investors rolled over maturing debt.
• South Africa: Foreign bond holdings were positive, but there were significant weekly outflows.
• Hungary: Foreign bond holdings were positive, with some fluctuations in weekly flows.
• FX Reserves: Increased in several countries, including Turkey, South Africa, and Hungary.

LATAM

• Bond Flows: Negative for the week, with the first outflow since March.
• Equity Flows: Positive, with inflows into Brazil and Mexico.
• Foreign Participation:
  • Mexico's foreign participation rate hit a new high of 37.3%.
  • Colombia's foreign participation rate increased by almost 2 percentage points to 12.5%.
• FX Reserves: Generally stable or increasing, with some notable changes.

Summary Table

Contacts

• CEEMEA:
  • Piotr Chwiejczak: FX & IR CEEMEA Strategist, London
  • Dina Ahmad: FX & IR CEEMEA Strategist, London
  • Erkin Isik: FX & IR CEEMEA Strategist, Istanbul
• Asia:
  • Mirza Baig: Head of FX & IR Asia Strategy, Singapore
  • Jasmine Poh: FX & IR Asia Strategy, Singapore
  • Ray Heung: Head Asia Credit Strategy, Hong Kong
• LATAM:
  • Gabriel Gersztein: Head FX & IR Latam Strategy, Sao Paulo
  • Thiago Alday: FX & IR Latam Strategist, Sao Paulo
  • Damien Botton: LATAM Credit Strategy, Sao Paulo

Disclaimer

• The 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 is based on public sources and may not be accurate or complete.
• BNP Paribas accepts no liability for any loss arising from the use of this report.
• The report is intended for professional clients only and is not for retail clients.
• It is non-independent and has been approved for publication in certain jurisdictions.