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FX & IR EM STRATEGY Summary

Core Content Overview

This document provides an analysis of foreign portfolio inflows and foreign exchange (FX) reserve movements in Emerging Markets (EM) for the week ending April 8th, 2014, with a focus on Asia, CEEMEA (Central and Eastern European Markets), and Latin America (LATAM). It also includes detailed regional analysis and data sources, along with contact information for strategy teams and important disclosures regarding the nature of the report as non-independent marketing communication.

Main Points and Key Information

Equity Flows

• Asia: Equity inflows remained positive across all countries for the third consecutive week, with Korea leading. However, the pace of inflows slowed overall (Chart 3).
• CEEMEA: Positive equity inflows were observed in South Africa, Turkey, and Hungary. Turkey recorded net inflows of USD 0.5bn into its equity market.
• LATAM: Positive equity and bond flows were reported, with Mexico and Brazil being the main highlights. Mexico saw USD 246mn in bond inflows, while Brazil recorded USD 152mn.

Bond Flows

• Asia: Bond inflows were mixed, with Thailand and Korea seeing increased inflows, while Indonesia's inflows moderated and India's turned negative. India also reported a sharp increase in FX reserves (USD9.5bn), indicating the Reserve Bank of India (RBI) may be managing the rupee's appreciation.
• CEEMEA: Inflows were recorded into the local debt markets of South Africa, Turkey, and Hungary. Turkey had USD 1.3bn in foreign bond holdings, mainly from 2023 and 2018 bonds. South Africa and Hungary also showed positive inflows.
• LATAM: Mexico and Brazil saw significant bond inflows. Mexico had USD 246mn, and Brazil had USD 152mn. Brazil's bond inflows were also supported by positive foreign bond holdings.

FX Reserve Accumulation

• Asia: FX reserves showed mixed trends, with some countries experiencing inflows and others outflows.
• CEEMEA: FX reserves showed varied movements, with notable inflows in Turkey and South Africa.
• LATAM: FX reserves in Brazil, Mexico, and Colombia were positive, indicating continued foreign investment in these markets.

Data Sources and Methodology

• Equity and bond flows are sourced from EPFR, BNP Paribas, and local exchanges.
• Notes highlight that daily data may not fully represent actual capital flows due to specific limitations, such as not accounting for redemptions or only covering certain bond types.
• Monthly data is used to correct these discrepancies and provide a more accurate picture of inflows and outflows.

Key Observations

• Asia: Korea led equity inflows, while India's bond flows turned negative, suggesting central bank intervention.
• CEEMEA: Turkey and South Africa showed strong inflows into both equity and bond markets.
• LATAM: Brazil and Mexico had significant bond inflows, with Brazil also showing positive equity flows.
• Overall: SAGBs (Southeast Asian Government Bonds) continued to attract inflows, supported by positive non-resident flows.

Contact Information

• Asia Strategy Team:

  • Piotr Chwiejczak – FX & IR CEEMEA Strategist, London
  • Dina Ahmad – FX & IR CEEMEA Strategist, London
  • 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

• LATAM Strategy Team:

  • 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

Important Disclosures

• This document is non-independent marketing communication and may be subject to conflicts of interest due to interactions with sales and trading.
• It is not independent investment research and has not been prepared in accordance with legal requirements to ensure independence.
• The information is based on public sources and is not guaranteed to be accurate, complete, or up to date.
• BNP Paribas may have financial interests in the issuers mentioned and may have acted on the information before its publication.
• The report is intended for professional clients only and is not suitable for retail clients.
• It is approved for publication in the UK and France, with distribution restrictions in other regions.

Conclusion

The document outlines the recent trends in EM equity and bond flows, highlighting continued inflows into certain regions and countries, with specific emphasis on Asia, CEEMEA, and LATAM. It underscores the importance of monitoring FX reserves and the role of central banks in managing currency appreciation. The report serves as a strategic reference for investors and is subject to the necessary disclosures regarding its non-independent nature.