Fund Trends’ Opposite Optic Outcry
As fund trackers EPFR and the IIF released joint research describing different methodologies and 2014 consensus themes, their readings through February further presented a mixed picture as equity flows lagged but debt interest was also subdued. The latter’s latest monthly compilation of high-frequency data in 8 markets halved January’s $28 billion foreign portfolio investment estimate, while the former’s public mutual fund base showed $2 billion fixed-income allocation versus $4 billion in equity outflows. Emerging securities markets account for around one-tenth of global commitments, and in the past decade ETF subscriptions over $150 billion have converged with active managers’ $230 billion as both retail and institutional investors take the low-cost exchange-listed and regularly traded option. Hard is behind local currency embrace so far this year in contrast to recent preference and US, European and Japanese buyers have all been active. Corporate figures have flagged with $500 million in flight from dedicated vehicles but $1.5 billion coming in from multi-strategy ones. For stocks all geographic regions are down and especially global diversified, but EMEA has bottomed out after years of political and geopolitical convulsions as Russia received nibbles. Individual investors however who have driven almost 300 billion in ETF creation for one-quarter of the fund universe are still wary of the headlines as they shun the BRIC category overall. At the end of February banks followed the sovereign into across-the-board ratings downgrades with S&P projecting a 20 percent NPL ratio which could devastate smaller non-state owned competitors after the central bank’s announcement already of several closures. Consumer lending has dried up and government bond holdings will suffer losses as benchmark yields drift to 15 percent, as $50 billion will be drawn from the Reserve Fund to cover the 3 percent of GDP budget gap. In the group Turkey had been a popular overweight but has sputtered in 2015 as the monetary authority is pressed by President Erdogan to slash interest rates amid rumors his long-serving technocrat economic team could be dismissed. The lira has again crumble past 2.5 dollar with his harsh rhetoric also directed at the media and unions whose leaders have been charged with national security violations.
Sub-Sahara Africa turned flat on debt run-up, commodity correction and civil and health emergencies with the IMF tapped for resumed assistance, Ghana experienced double-digit bond and stock index falls last year that have partially reversed with a $1 billion staff agreement reached at end-February, as international reserve coverage was down to a few days’ imports before Eurobond and syndicated loan issuance. Economic growth is put at 3 percent, with the fiscal and current account deficit each at 7 percent of GDP, as oil subsidies and the public wage bill are contained. A new petroleum tax and purging of “ghost workers” from the civil service are planned, as monetary policy aims for single-digit inflation and will unify the multiple-exchange rate system as the central bank emphasizes an opposite tendency toward government independence.
