Outflows cont nue but lose steam

Dünya Executive - - REPORT - Analyst, DB

After some inflows in late September and early October, we have seen outflows from local assets over the past four weeks, but they have lost steam significan­tly over the past two weeks. Local bonds saw inflows last week after three weeks of outflows, while equities continued seeing outflows. Looking further back, since April, we have now seen outflows in most weeks (22 out of 28 weeks). This said, compared to May and June, the most recent outflows have been noticeably smaller.

The overall pattern of this year’s outflows can still be characteri­sed as persistent, slow-paced and contained, with the size of outflows being nowhere near those seen during the taper tantrum or in late 2016 (the

U.S. election). Our Emerging Markets Risk Monitor remains in the risk-negative territory, with unfavorabl­e developmen­ts in EMEA and Latin America. EMEA has slid into the risk-negative area from risk-neutral, while Asia and LatAm remain in risk-negative territory. The EM Fixed Income/EMFX Performanc­e Monitor – back to “cheap” territory - compared to flows over the past week, returns on EM local bonds and FX have been weaker than what is implied by flow indicators. Driven by weak performanc­e, EMFX is now moving back to “cheap” territory as implied by cumulative flows, from the fair level seen two weeks ago. (November 2)

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