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FX & IR EM STRATEGY Summary

Core Content

This document provides a detailed analysis of emerging market (EM) fund flows and foreign ownership trends in the week of May 14th, 2014, focusing on Asia, CEEMEA, and Latin America (LATAM). It highlights equity and bond inflows, central bank data, and foreign ownership percentages for various countries. The report also includes notes on data sources, limitations, and disclosures, emphasizing that it is non-independent marketing communication and not investment research.

Main Points

Overall EM Fund Flows (Week of May 14th)

• Equity funds attracted USD 458mn in inflows.
• Bond funds saw USD 1085mn in inflows.
• Thailand was the only country in Asia with outflows in both equity and bond markets.

Asia Fund Flows

• India experienced accelerated inflows in both equity and bond markets due to early indications of a BJP landslide victory.
• Korea saw a turnaround in equity flows, while debt inflows slowed.
• Thailand remains the weakest link in Asia with outflows in both asset classes.
• Taiwan and Philippines had mixed inflows and outflows, but data coverage is limited.
• Indonesia and Malaysia showed positive net flows in bond and equity markets.

CEEMEA Fund Flows

• HGBs (High Grade Bonds) and SAGBs (Sovereign and Agency Bonds) saw net inflows of USD 380mn and USD 1.1bn, respectively.
• Turkey recorded outflows of USD 661mn, despite the CBRT's interest rate cut expectations.

Latin America Fund Flows

• Latin America bond markets saw USD 523.15mn in inflows during the week of May 7th to May 14th.
• Mexico and Colombia were the top performers in bond inflows, with USD 174.57mn and USD 122.9mn respectively.
• Brazil continued to attract equity inflows of USD 168.77mn, contributing to a 1-month rolling inflow of USD 797.09mn.
• Mexico had a slight rebound in equity flows, with USD 47.78mn in inflows.
• Colombia reported USD 1245bn COP in April inflows (4490bn COP YtD), with foreign participation increasing to 8.31%.
• Mexico had an outflow of 59bn MXN in April.

Key Information

Equity Flows

• India led with USD 2333mn in equity inflows (May MTD).
• Korea had a positive equity flow but moderated debt inflows.
• Thailand had negative equity and bond flows.
• Philippines and Indonesia showed positive equity flows.
• Brazil and Mexico had positive equity flows, with Brazil leading the rolling inflow.

Bond Flows

• Asia: India had USD 920mn in bond inflows, while Thailand had negative flows.
• CEEMEA: HGBs and SAGBs saw positive flows, but Turkey had negative flows.
• LATAM: Mexico and Colombia had positive bond flows, with Brazil also showing positive flows.

Foreign Bond Ownership

• India: Foreign ownership reached 25.2% of outstanding KTB & MSB bonds.
• Korea: Foreign ownership stood at 16.8% of outstanding KTB futures.
• Thailand: Foreign ownership in Thai government bonds was 13.2%, but data does not include BoT bills and corporate bonds.
• Indonesia: Foreign ownership in govt bonds was 34.6%.
• Philippines: Foreign ownership in govt bonds was 40.0%.
• Turkey: Foreign bond holdings were USD 51.1bn, with negative flows in May.
• South Africa: Foreign bond holdings were USD 41.4bn, with positive flows.
• Hungary: Foreign bond holdings were USD 2.0bn, with positive flows.

Data Sources and Notes

• Equity flows: Data sourced from local stock exchanges and EPFR.
• Bond flows: Data sourced from central banks, Bloomberg, and BNP Paribas.
• Notes on data:
  • Korea: Daily data refers to "net purchases" not "net investment".
  • India: FX flows occur when SEBI auctions fresh limits.
  • Thailand: Data only covers Thai government bonds.
  • Indonesia: Data covers all govt bonds, not SBI bills and corporate bonds.
  • Philippines: Data covers govt bonds and equity inflows, but not asset class breakdown.
  • Daily foreign equity flows: Available via Bloomberg page WFII.

Disclaimer and Legal Information

• This document is non-independent marketing communication and not investment research.
• It is not subject to independence requirements.
• No liability is accepted for any loss from reliance on the report.
• BNP Paribas may have financial interests in the mentioned issuers and may be involved in investment banking or underwriting activities.
• The report is intended for professional clients only and is not for retail clients.
• Regional restrictions apply, and it is approved for publication in specific jurisdictions.

Strategy Contacts

Distribution and Legal Restrictions

• Distribution: Contact Diana Seifert, Foreign Exchange, London.
• Legal disclaimer: The report is non-independent and not subject to legal independence requirements.
• Regional restrictions:
  • UK: Approved by BNP Paribas London Branch.
  • France: Approved by BNP Paribas SA.
  • Germany: Distributed by BNP Paribas London Branch or Frankfurt Branch.
  • US: Distributed to major institutional investors only.
  • Israel: No license to offer investment advice.
  • Japan: Distributed to Japanese-based firms only.
  • Hong Kong: Distributed by BNP Paribas Hong Kong Branch.

Final Notes

• This report is for internal use and not to be reproduced without prior written consent.
• No liability is accepted for any use of the information.
• Performance data is for reference only and not indicative of future performance.