Capital flows surged to EM after the 18 March FOMC meeting and should continue to flow
• We are bullish Thai and Malaysian bonds, where underweight positions are being covered
• Recent rise in euro-area bond yields is a concern for EM rates, bu...
Foreign investor sentiment towards emerging markets has improved after the 18 March FOMC meeting
EM funds remain overweight duration and still favour Indonesia, but are returning to Malaysia
EM/DM yield spread to be range-bound as foreign investor...
Current investor behaviour supports EM bonds, based on SC FIRST data on EM flows and positioning
• Foreign holdings recovered in January after dipping in December; structural demand for EM continues
• Indonesia stood out as the big positive story ...
Fed will be patient but EM investors are not; outflows are channelling through more liquid bond markets
• While overall flows reflect the Fed story, relative flows show the lower oil story still captures mindshare
• Stressed markets care about e...
We met with clients across the US last week to discuss opportunities heading into 2015
• Post-OPEC, the focus was heavily on oil; moves in trade-weighted FX had less focus
• Risk addition is likely to be light into year-end; currency wars will rem...
Direction signal now neutral from negative as foreign flows to EM debt, especially oil importers, improve
• Spread signal turns positive on flows to high-yielding oil importers (INR, ZAR, TRY, IDR) plus Brazil
• October fund allocations reflect ...
Direction signal stays negative on weak demand for EM debt; EM FX weakness puts pressure on EM bonds
• Structural investors continue to favour Asia bonds; hard data supports Korea and Indonesia
• Flow rotation continues from Russia, Turkey and So...
Indonesia has been attracting unusually high inflows on a strong local story relative to valuations
• Funds moved overweight during July and August, but positioning is only a risk if fundamentals change
• EM-21 reserve build over May-July leaned a...
In the budget, the finance minister mentioned making Indian debt eligible for international settlement
• Such a move would substantially ease operational issues faced by foreigners in accessing local debt
• For international settlement to be effe...
• New allocations charts show ongoing short-covering that will continue to support Thai bonds and FX
• Direction signal back to positive: add new long 5Y THB bonds vs pay 5Y swaps
• Spread signal shifts down to neutral, supporting low-yield bonds ...
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