Macquarie Research, Fund Flow Tracker Firm finish to a strong year in Asia

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Fund Flow Tracker
Firm finish to a strong year
Local Exchange Data: Ending 2010 on a strong note
 Taiwan and Korea continue to attract foreign buyers. Over the past week,
each of the six MSCI Asia ex-Japan markets where weekly foreign equity
purchase data is available (i.e. Korea, Taiwan, India, Thailand, Indonesia and
the Philippines) recorded net-positive foreign buying. In aggregate, net-buying
increased 74% WoW to US$1.6 bn vs. US$920mn the week before. This
continues to be driven by stronger buying in Taiwan of US$724 mn (up 53%
WoW), with sustained buying in Korea of US$520mn as well.

 Healthier tone in India and the TIPs. India’s foreign net buying rebounded to
US$211mn this week from US$12mn the week earlier (although still well
below India’s 2H10 weekly average of US$806mn). And the TIPs markets
(Thailand, Indonesia and the Philippines) all experienced a reversal of last
week’s net selling. Of note, Indonesia’s weekly foreign net-buying recorded a
US$244mn swing to US$+116 mn this week from US$-128 mn last week.
 Japan’s net-buying streak sustains but is slow. Japan sustained its eighth
consecutive week of net-buying since the start of November -- although at
US$342mn, the bid was very muted compared to US$2.5 bn the week before.
 Buying in the frontier markets driven by Vietnam. Vietnam and Pakistan
maintained their level of foreign net-buying from the prior week, marking the
40th week of consecutive net-buying for Vietnam and 29th for Pakistan. Sri-
Lanka remains the only Frontier market to record net-selling this week.
 Full-year foreign buying of Asia ex-Japan rose 5% YoY by value in 2010,
down slightly as % of total market cap. In terms of relative size, net buying
in 2010 was driven by Thailand, India, Philippines and Indonesia -- which saw
YoY increases in both their absolute foreign net-buying and as % of total
market cap (Figure 1). Foreign net-buying at Taiwan and Korea decreased
YoY both in absolute terms and as a percent of market cap. Of note, foreign
buying of Vietnam in 2010 increased nearly eight-fold over 2009 and
amounted to over 20% of total market capitalization. And Pakistan recorded a
fully 25-fold increase in foreign buying, over 10% of total market cap.
Fund Subscription Data: Country-fund redemptions ease
 Emerging Asia: Pan-regional funds continue to drive subscriptions.
Weekly subscriptions to Asia ex-Japan regional funds nearly doubled WoW to
US$422 mn vs. US$217mn previously. Meanwhile, net redemptions from
various single-country funds eased WoW, to just US$-64 mn vs. US$-680 mn
last week. This was helped by China funds, which received net subscriptions
of US$55.6 mn, vs. net redemptions the prior week of US-150.7mn. But this is
still below China funds’ 2H10 weekly average subscription of US$+108mn.
 Developed Asia: Japan subscriptions pick up. Japan-dedicated funds
recorded US$147 mn in weekly net-subscriptions, up from US$83.6 mn the
week before, while net-redemption at Asia Pacific funds (which include Japan,
Australia and New Zealand in addition to emerging Asia) tapered to just US$-
9.7 mn this week, compared to US$167 mn a week ago.
 Stronger appetite for EM Equity asset class. Although still below their YTD
averages, general Global Emerging Market funds received much stronger netsubscriptions
of US$696mn this week, vs. just US$28mn one week ago.