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FX & IR EM STRATEGY Summary

Core Content

This report provides an overview of emerging market (EM) flows, including equity and bond inflows/outflows, and foreign ownership levels in various regions, with a focus on Asia, CEEMEA, and Latin America (LATAM). It highlights the trends in capital flows and foreign investment behavior, with a note that the document is classified as non-independent marketing communication.

Main Points

Equity Flows

• Emerging market equity funds have experienced 23 consecutive weeks of outflows.
• The pace of outflows slowed significantly in the week to March 26, with a drop from USD 4bn to USD 12mn.
• In Asia, equity inflows accelerated last week, with Korea turning positive and India attracting the most inflows in March.
• Indonesia remained an exception with equity outflows in the region.
• In CEEMEA, South Africa showed a positive shift with inflows to SAGBs reaching USD 550mn in the last week, bringing March inflows to USD 818mn.
• Turkey experienced outflows of over USD 1bn in March due to political risks.

Bond Flows

• Emerging market bond funds continued to report outflows, with hard currency funds seeing USD 425mn and local currency funds USD 653mn.
• In Asia, foreign debt flows into Thailand increased while those into Korea and Indonesia moderated.
• India saw foreign sales for the second week, but overall flows remained positive for the month.
• Brazil reported a record high in foreign ownership of local debt at 17.4% as of February, with inflows of BRL 7.8bn (USD 3.3bn).
• Mexico had foreign ownership of local debt at 41.61% as of March 18, slightly lower than the historical high of 42.31%.
• In CEEMEA, South Africa's bond inflows were a positive trend, while Turkey faced outflows.

Key Information

Asia

• Equity Flows:
  • Inflows accelerated last week, with Korea turning positive and India as the top inflow destination in March.
  • Indonesia was an exception with outflows.
• Bond Flows:
  • Foreign debt flows into Thailand increased, while those into Korea and Indonesia moderated.
  • India saw continued foreign selling, but overall flows remained positive for the month.

CEEMEA

• Equity Flows:
  • South Africa showed a positive shift with inflows to SAGBs of USD 550mn in the last week.
• Bond Flows:
  • South Africa's bond inflows totaled USD 818mn for March.
  • Turkey experienced outflows of over USD 1bn due to political risks.

Latin America (LATAM)

• Equity Flows:
  • No significant equity rebalancing was reported.
• Bond Flows:
  • Brazil reached an all-time high in foreign debt ownership at 17.4%.
  • Mexico's foreign ownership of local debt was at 41.61%, a slight decrease from the historical high.

Charts and Data

• Chart 1: All EM equity vs EM bonds flows.
• Chart 2: Weekly EM bond flows by currency type vs JPM USD EM bond ETF.
• Chart 3: Equity inflows: latest snapshot (USDmn).
• Chart 4: Equity inflows: recent trends (USDmn).
• Chart 5: EPFR weekly flows in all EM and Asia equities.
• Chart 7: EPFR weekly flows in all EM and LATAM equities.
• Chart 8: Asia bond inflows: recent trends (USDmn).
• Chart 10: CEEMEA bond inflows: recent trends (USDmn).
• Chart 12: LATAM bond inflows: recent trends (USDmn).
• Chart 14, 15, 16, 17, 18: FX reserve changes for Asia, CEEMEA, and LATAM.
• Chart 20–37: Region-specific equity and bond flows for various countries.
• Chart 38–49: Region-specific bond ownership and flows for Turkey, South Africa, Hungary, and Latin American countries.

Notes on Data Sources

• Daily equity flows are sourced from local stock exchanges via Bloomberg.
• Daily debt flows have specific caveats and may not reflect actual cross-border flows.
• Data coverage varies by country, and some sources do not capture all asset classes or corporate bonds.

Important Disclosures

• The report is non-independent and may be subject to conflicts of interest.
• It is not intended for retail clients and is for professional clients only.
• BNP Paribas may be involved in investment banking or other services for the entities mentioned.
• The report is for the use of intended recipients and may not be reproduced or transmitted without consent.

Contacts

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

Distribution and Legal Information

• Contact Diana Seifert for distribution inquiries.
• The document is subject to legal limitations and is not independent investment research.
• BNP Paribas is incorporated in France and may be subject to different regulations in various countries.