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FX & IR EM STRATEGY Summary

Core Content

This document provides an overview of foreign investment flows into Emerging Markets (EM) equity and bond funds, as well as foreign bond ownership and FX reserve changes in key EM regions: Asia, CEEMEA, and Latin America (LATAM). It includes data from various sources such as EPFR, BNP Paribas, and local central banks, highlighting the trends and dynamics in these markets as of the week ending 23rd July 2014.

Main Points

Equity Flows

• Net outflows of EM equity funds totaled USD 15mn in the week to 23rd July, while EM bond funds saw USD 267mn in net inflows.
• In Asia, equity inflows were moderated, with the bulk of inflows in Korea, Taiwan, and India.
• Thailand saw significant bond inflows, reaching USD2bn this week and USD4.5bn month-to-date.
• Indonesia experienced increased bond inflows post-presidential election.
• Turkey showed a USD 0.1bn decline in foreign bond holdings despite a USD 0.5bn decline in repos, but foreign investors rolled over maturing debt by adding TRY 1.5bn in 2016 and 2024 bonds.
• South Africa had outflows of SAGBs of over USD 600mn in the week to 25th July, reversing earlier inflows.

Bond Flows

• Fixed income in Latin America attracted USD 198mm (or USD 701mm over one month), while equity markets saw USD 45mm inflow, still negative over one month.
• Mexico and Colombia outperformed Brazil in bond inflows, with USD 54mm and USD 67mm respectively.
• Brazil had USD 13.8bn in foreign bond inflows for June, with a foreign participation rate of 18.2%.

FX Reserves

• Asia, CEEMEA, and LATAM FX reserves are reported with monthly changes and 3-month moving averages.
• Thailand and Indonesia showed notable bond inflows, with Thailand leading in foreign bond ownership.

Key Information

Asia

• Thailand was the top recipient of bond inflows, with USD2bn this week and USD4.5bn month-to-date.
• India saw a slowdown in bond inflows, with USD 2895mn month-to-date.
• Korea had USD 2301mn in bond inflows for July, and USD 5365mn in government bonds.
• Philippines had negative bond inflows, with USD -149mn month-to-date.
• Korea had a high level of foreign ownership, with USD 154.9bn in foreign bond holdings.

CEEMEA

• Turkey had USD 0.1bn decline in foreign bond holdings, but rolled over maturing debt by adding TRY 1.5bn in 2016 and 2024 bonds.
• South Africa had SAGBs outflows of over USD 600mn in the week to 25th July.
• Hungary and Zimbabwe showed mixed results in bond holdings and flows.

LATAM

• Brazil had USD 13.8bn in foreign bond inflows for June, with a foreign participation rate of 18.2%.
• Mexico and Colombia had USD 54mm and USD 67mm inflows respectively, outperforming Brazil.
• LATAM saw divergence in equity and bond flows, with bond flows being positive and equity flows negative.

Summary of Flows and Ownership

• Asia:

  • Equity flows: USD 15mn outflows.
  • Bond flows: USD 267mn inflows.
  • Key inflows: Thailand (USD2bn), Korea (USD2301mn), India (USD2895mn).
  • Key outflows: Philippines (USD -149mn).

• CEEMEA:

  • Equity flows: SAGBs outflows of USD 600mn.
  • Bond flows: Turkey (USD 0.1bn outflow), South Africa (USD 180mn), Hungary (USD -10mn).
  • Foreign ownership: Turkey (TRY 1bn), South Africa (ZAR 42.9bn), Hungary (HUF 21.5bn).

• LATAM:

  • Bond flows: USD 198mm inflows.
  • Key inflows: Mexico (USD 54mm), Colombia (USD 67mm).
  • Foreign ownership: Brazil (BRL 191.1bn), Mexico (MXN 154.9bn), Colombia (COP 10.3bn).

Important Contacts

Emerging Markets Strategy Contacts

• Piotr Chwieczak: FX & IR CEEMEA Strategist, London, Email: piotr.chwieczak@uk.bnpparibas.com
• Dina Ahmad: FX & IR CEEMEA Strategist, London, Email: dina.ahmad@uk.bnpparibas.com
• David Spiegel: Global Head of Sovereign and Credit Strategy, London, Email: david.spiegel@uk.bnpparibas.com
• Erkin Isik: FX & IR CEEMEA Strategist, Istanbul, Email: erkin.isik@teb.com.tr
• Mirza Baig: Head of FX & IR Asia Strategy, Singapore, Email: mirza.s.baig@asia.bnpparibas.com
• Jasmine Poh: FX & IR Asia Strategy, Singapore, Email: jasmine.j.poh@asia.bnpparibas.com
• Yii Hui Wong: FX & IR Asia Strategy, Singapore, Email: yihui.wong@asia.bnpparibas.com
• Jennifer Kusuma: FX & IR Asia Strategy, Singapore, Email: jennifer.kusuma@asia.bnpparibas.com
• Ray Heung: Head Asia Credit Strategy, Hong Kong, Email: ray.heung@asia.bnpparibas.com
• Susan Chie: Asia Credit Strategy, Hong Kong, Email: susan.chie@asia.bnpparibas.com
• Rahul Gupta: Asia Credit Strategy, Hong Kong, Email: rahul.gupta@asia.bnpparibas.com
• Tony H Chen: Asia Credit Strategy, Hong Kong, Email: tony.h.chen@asia.bnpparibas.com
• Gabriel Gersztein: Head FX & IR Latam Strategy, Sao Paulo, Email: gabriel.gersztein@br.bnpparibas.com
• Thiago Alday: FX & IR Latam Strategist, Sao Paulo, Email: thiago.alday@br.bnpparibas.com
• James Z Hao: FX & IR Latam Strategist, New York, Email: james.z.hao@us.bnpparibas.com
• Damien Botton: LATAM Credit Strategy, Sao Paulo, Email: damien.botton@br.bnpparibas.com

Emerging Markets Sector Specialists Contacts

• Tatiana Tchembarova: Sector Specialist, London, Email: tatiana.tchembarova@uk.bnpparibas.com
• Luba Fakhrutdinova: Sector Specialist, London, Email: luba.fakhrutdinova@uk.bnpparibas.com

Disclaimer

This document is a marketing communication and not independent investment research. It is not subject to the independence requirements of legal regulations and may be influenced by conflicts of interest. The information and opinions are based on public sources and are not guaranteed to be accurate, complete, or up to date. BNP Paribas may have financial interests in the mentioned entities and may solicit investment banking services. This report is intended for professional clients only and is not for retail clients.