Jul 02, 2013, 04.10 PM | Source: CNBC-TV18

Outflows from emerging mkts easing; US jobs data eyed: EPFR

In an interview to CNBC-TV18, Cameron Brandt, Director - Research, EPFR Global said that the FII outflows from emerging markets had seen a moderate reduction. He added that India had seen an outflow of USD 12 million on the last day of the last week.

Cameron Brandt

Sr Analyst, EPFR Global

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Cameron Brandt, director for research at EPFR Global said that the outflows from the emerging markets, based on daily numbers from last week, had reduced.

He presented some statistics to show the moderation in the outflows.

"Last week saw EM bond funds outflows post a weekly record of USD 5 billion. But, on the last day of the week, net outflows from EM funds were USD 400 million against a daily level of USD 1 billion earlier."

India's share in this outflow stood at over USD 12 million."

He expects strong reactions from the fixed income funds on the back of the US jobs data this week. The US Fed's actions on their quantitative easing programme impact the movements in this sector, he said.

Also read: FIIs pull out $7.5 bn from Indian capital mkts in June

Below is the edited transcript of his interview to CNBC-TV18.

Q: There has been some kind of a lull in the outflows of funds from emerging markets (EMs); atleast if you look at the stock indices. Can you give us some idea about whether you have actually seen a decline of in the exit of money from EM funds?

A: What you say is borne out by the daily numbers, which showed a moderating of outflows as last week progressed. Certainly what the flows showed over slightly longer period was that investors were not expecting a quite a degree of certainty from Ben Bernanke at the last Fed meeting.

Outflows had been heading towards inflows just before the meeting and that reversed sharply. But once the initial shock was over, we definitely saw on EMs equity funds side an easing of outflows. Investors began to really look hard at what he said and listen to the follow-up qualifications from other members of the Fed.

Q: I was actually looking for some numbers on the outflows in the latest week from EM funds. How does the latest statistic compare to the outflows in the week before?

A: We do have a Thursday to Wednesday week. The most recent week saw both EMs bond funds and EMs equity funds post net outflows. In case of EM bond funds, a weekly record of over USD 5 billion was posted.

However, on the last day of last week i.e. on Friday; net outflows from all EM funds were only USD 400 million. This was down from daily levels of around USD 1 billion plus earlier in the week.

The moderation was actually especially noticeable among the emerging Asia equity funds. Maybe, of the final day of the week, dedicated India equity funds only saw net outflows of over USD 12 million. It is not a particularly significant amount.

Q: Are you perhaps sensing some sheer exhaustion from selling? Is that the reason why we have seen that moderation? More importantly, any categories that were relatively less deserted or perhaps which even saw inflows towards the end because we saw the US markets recover towards mid of last week. So, did the develop markets perhaps see some inflows?

A: There are a couple of I don’t know. Sweet spot is the right word. On the EM, there are two areas that do seem to be viewed with optimism. One is frontier markets. Even though, they stumbled a bit last week, investors have felt that their risk was worth it given the stronger-than-average growth. There has been frequent lack of correlation between the global economy in general.

There has definitely been a shift back towards some of the big export stories. They stumbled very badly in May earlier this month on fears that the Japanese efforts to weaken the yen. It would really take a bite out of the many of the bigger stories especially Korea and China.

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