Emerging markets (EMs) fund outflows on a year-to-date (YTD) basis are still seriously under the weather; however India has been a singular outperformer.
In an interview to CNBC-TV18, Rishav Dev, Quant Capital Institutional Equities said fund flow trend on the equity side is in skewed towards developed markets than EMs, with Europe being the major receipt.
On the other hand, outflows from EMs continue, like in 2013. “In the last 17 weeks, outflow figure is close to USD 34 billion from emerging markets,” he said. But the pace of outflows from EM equity funds has moderated significantly in last two weeks.
Meanwhile, bond markets have continued to attract inflows in the past six to seven weeks, a big deviation from heavy outflows seen last year, he added.
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Below is the verbatim transcript Rishav Dev’s interview with CNBC-TV18’s Latha Venkatesh and Ekta Batra. For the complete interview watch the accompanying video
Latha: From the flows you have detected what are the key trends? First of all from equity to debt globally what has been the run rate and more importantly between developed markets (DMs) and emerging markets (EMs) what has been the trend year-to-date (YTD) – January to now?
A: The trend has been different from 2013; second half of 2013. Bond markets have continued to attract inflows in the past six to seven weeks, which is a big deviation from what we saw since May 29 of last year wherein bond markets saw heavy outflows.
On the equity side, the trend has been skewed in favour of developed markets rather than emerging markets. The interesting thing is that last year US was the driver behind all the inflows that developed markets saw. This year, it is the European funds that has attracted majority of the inflows.
YTD developed markets have attracted close to USD 29 billion of money this year and out of this close to 80 percent has been into European funds. In figure terms, that is close to USD 23 billion that European funds have attracted.
In emerging markets, the trend is very similar to last year what we saw. We are still seeing outflows. In the last 17 weeks, outflow figure is close to USD 34 billion from emerging markets. However, having said that, the pace of outflow has moderated significantly in last two weeks.
Latha: Can you put some number to that significantly? Is it that it has been moderated by some inflows or have outflows stopped? What would be the number compared to that USD 34 billion?
A: There has not been any inflow. Three weeks back the outflow figure was close to USD 6 billion. Two weeks back it was USD 3 billion and last week it was USD 1.6 billion. So, every week it has halved. The redemptions have halved. Last weeks data of USD 1.6 billion was the lowest figure since November of last year. So, clearly the pace has moderated and there is some sort of stability that we are seeing in emerging markets at least in terms of flows.
Ekta: Can you just compare how India has done vis-à-vis other emerging markets in terms of debt as well as equity flows?
A: On the debt side, we have seen huge inflows this year. In January and February, we have seen inflows to the tune of Rs 25,000 crore on the debt side and the primary reason for it being a stable INR. However, on the equity side we began the year very positively with the first three weeks we saw inflows of USD 500 million.
However, post that there was a drastic meltdown and we saw outflows of USD 800 million. It is only in the last two weeks that the flows have picked up and the YTD figure as of now stands at USD 95 million. So, if you compare with the numbers of last year on the equity side the numbers look very small. However, what we believe that only post elections we will see any big numbers on the equity side. Pre-elections it is very difficult to see huge numbers coming out.
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