Page 84 - RusRPTApr20

Equity: Outflows from Russia halt, focus off EM equities – market-neutral. Flows in Russia-dedicated funds surprised last week. The net number was close to zero, while Russia ETFs managed to attract c$10mn during the week – investors have apparently shifted their attention elsewhere, as the oil price collapse has been arrested. GEM equity funds reported another $4.3bn out during the week – slightly less than in the previous one, but still significant. The flow momentum in EM equity funds seems to be stabilizing right now – a welcome sign. Global investors are busy with developments in their home countries as the pandemic toll skyrockets, while Chinese and Korean experience in containing the outbreak give hope for the hardest hit countries. While EMs are likely to stay out of the spotlight, the volatility is hard to play against – a neutral short-term view is more prudent, but we do expect things to get worse before getting sustainably better.
Bonds: Another $10bn out of EM bonds in a week – more to go, stay cautious. To the contrary, outflows from Russia bond funds accelerated to hit the highest number since June 2014 – timely withdrawals that preceded Russia’s recession. It appears that neither the CBR’s rate decision, nor the ruble’s stabilization were enough to stop the outflows last week. Outflows from GEM bond funds stayed close to the 10Y record as $9.7bn left during the week. As EM bonds have been one of the most overheated asset classes in the past four years, we see more room for the outsized outflows to persist in the short term and believe a negative stance from the flow momentum standpoint is still justified.
84 RUSSIA Country Report April 2020 www.intellinews.com