Page 71 - RusRPTApr19

“For the third time in four weeks, EMs overall saw net outflow, according to the EPFR Global data for the week to March 13. Some $2.8bn exited the asset class, equivalent to 0.23% of sampled AUM,” Sberbank CIB analysts Cole Akeson and Andrey Kuznetsov said in a note. “EMs had not seen a single week of outflows this large since June 2018. Recently weak macro data for China and Europe, and at best mixed data for the US, have hampered risk sentiment in recent days. On the other side of the coin, US equities saw net inflow of $25.4bn, according to the Financial Times, citing EPFR, likely due to diminished risk appetites.”
The vast bulk of that outflow, almost $2.3bn, came out of Asia ex-Japan funds, equating to some 0.48% of their sampled AUM. Meanwhile, global emerging market funds saw net outflow of $203mn (0.03%), and EMEA funds saw net outflow of $169mn (0.53%), Sberbank reports.
Russian funds have been particularly battered and were by passed by funds during the upswing earlier this year. Russia saw the worst in AUM terms, at $167mn, or 0.29% of the total.
Russian equity dedicated funds have seen five weeks of uninterrupted outflows, according to EPFR Global, partly due to the arrest of US fund manager Michael Calvey on February 14, but this was also the time of heavy news flow on the impending new Defending American Security Against Kremlin Aggression Act (DASKAA) sanctions that may be passed in April.
The general outflow from funds with Russian exposure was circa $170mn, up from circa $90mn in the previous week – the forth weeks of outflows.
“Outflows hit all EM fund categories in the last week,” says Slava Smolyaninov, chief strategist and deputy head of research at BSC Global Markets. “Investors are losing faith in EM stocks, the data shows. It is hard to find a single country or regional group of funds that saw inflows in early March. Most outflows were in Asia, as a total of $2.3bn left funds focused on the region, including $1bn out of China funds – the largest outflows in 2.5 years. Russia funds reported a poor week, the second in a row, of more than $100mn outflows, mostly via ETFs. GEM funds that have cumulatively received $19bn in 2019 were also net losers for the first time this year. It is hard to see any support for the Russian stock market in the short term given the high degree of pessimism in EM stocks overall.”
Bond market record auctions
Bonds are a different story. “Investors are losing faith in EM stocks, but bonds remain attractive,” says Smolyaninov “Bonds’ divergence from equities is only gathering pace. Contrary to equities, EM bonds continue to attract new money. This unusual divergence between the usually positively correlated asset classes became visible from mid-February, and has since only gained pace. As a result, Russian bonds are set to continue beating stocks in the medium-
71 RUSSIA Country Report April 2019 www.intellinews.com