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FX & IR EM Strategy Summary

Core Content

This document provides an overview of the recent capital flow trends in Emerging Market (EM) equities and bonds, as well as FX reserve accumulation, across different regions: Asia, CEEMEA, and LATAM. The data is sourced from EPFR, BNP Paribas, local stock exchanges, and central banks. The report is a marketing communication and not independent investment research.

Main Points

EM Equity Flows

• Emerging market equity funds have seen continued net inflows of over USD 1.3bn, with Asia being the main beneficiary.
• Latam specific equity funds have experienced outflows for two and three weeks in a row, while EMEA also saw outflows.
• In Latam, equity outflows outpaced bond inflows (USD 321mn vs USD 280mn), although since the end of March, total net flows have been positive (USD 7.1bn).
• Brazil and Mexico are the primary contributors to equity outflows in Latam (USD 130mn and USD 196mn respectively).
• In Asia, equity inflows slowed last week, with North Asia (Taiwan and Korea) remaining the top destination for equity inflows, though the pace has moderated.
• Indonesia saw a slight negative equity flow last week.

EM Bond Flows

• Hard currency funds in EM saw USD 110mn in inflows, while blend funds had USD 430mn in inflows and local currency funds had a small USD 15mn outflow.
• In Latam, bond flows have been bumpier in Brazil since Q1'14, which explains the downplay of the USD 109mn outflow last week.
• Mexico and Colombia continued to see decent bond inflows (USD 114mn and USD 155mn respectively).
• In Asia, Korea maintained steady bond inflows, while momentum weakened elsewhere.

Foreign Bond Ownership

Asia

• Korea: Foreign ownership reached 93.4 USDbn, representing 25.9% of FX reserves and 15.9% of outstanding bonds.
• India: Foreign ownership is 32.6 USDbn, with 11.4% of FX reserves and 4.6% of outstanding bonds.
• Thailand: Foreign ownership is 19.7 USDbn, with 12.4% of FX reserves and 16.2% of outstanding bonds.
• Indonesia: Foreign ownership is 34.8 USDbn, with 32.5% of FX reserves and 35.7% of outstanding bonds.
• Philippines: Foreign ownership is 5.6 USDbn, with 7.0% of FX reserves and 6.8% of outstanding bonds.
• Malaysia: Foreign ownership is 72.4 USDbn, with 57.1% of FX reserves and 28.8% of outstanding bonds.

CEEMEA

• Turkey: Foreign bond holdings are 52.3 USDbn, with 40.0% of FX reserves and 28.3% of outstanding bonds.
• South Africa: Foreign bond holdings are 42.7 USDbn, with 102.6% of FX reserves and 47.6% of outstanding bonds.
• Hungary: Foreign bond holdings are 21.9 USDbn, with 46.2% of FX reserves and 52.8% of outstanding bonds.

LATAM

• Brazil: Foreign bond holdings are 190.4 USDbn, with 43.7% of FX reserves and 18.8% of outstanding bonds.
• Mexico: Foreign bond holdings are 142.0 USDbn, with 75.5% of FX reserves and 34.1% of outstanding bonds.
• Colombia: Foreign bond holdings are 9.0 USDbn, with 20.0% of FX reserves and 9.4% of outstanding bonds.

FX Reserve Accumulation

• Asia: FX reserves showed moderate growth last week, with Korea and Thailand being the main contributors.
• CEEMEA: FX reserves showed mixed results, with Turkey and South Africa experiencing positive changes.
• LATAM: FX reserves showed some growth, particularly in Brazil and Colombia.

Key Information

• The report includes various charts and tables to visualize the data.
• The data is subject to caveats and limitations, including the retrospective corrections in Mexico and the focus on specific bond types in different regions.
• Daily equity flows are sourced from local stock exchanges, while monthly data corrects for certain deficiencies.
• The document is non-independent and marketing communication, not to be relied upon as independent investment research.

Summary of Inflows and Outflows

Contacts

• Piotr Chwiejczak – FX & IR CEEMEA Strategist, London
• Dina Ahmad – FX & IR CEEMEA Strategist, London
• David Spiegel – Global Head of Sovereign and Credit Strategy, 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
• 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
• Damien Botton – LATAM Credit Strategy, Sao Paulo

Disclaimer

• This document is non-independent investment research and marketing communication.
• It is not subject to any prohibition on dealing ahead of the dissemination of investment research.
• The information and opinions are based on public sources and may be subject to change.
• BNP Paribas may have financial interests in the mentioned issuers and may accept responsibility for the content when distributed by its subsidiaries.
• The document is intended for professional clients only and not for retail clients.
• No liability is accepted for any loss arising from reliance on the material.