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It’s not the ETFs, again…
With macro concerns (inflation, infra slowdown etc) stepping up, FII
outflows have started from India. The total FII AUM in India at an all time
high of US$237bn as at Dec-10 doesn’t help. EM to DM trade is evident in
the ETF flow analysis with c.90% of all ETF inflows into US-based ETFs
going to US equities since the last two months (vis-à-vis only 32% in
CY10). In India, ETFs have accounted for only 6% of YTD FII outflows.
However, steep outflows by one ADR focussed fund ETF (EEM US) has
resulted in contraction of ADR/GDR premiums and the trend may
continue if the fund continues to see outflows.
FII’s India exposure close to all time high and can reverse
The large FII inflows in CY10 (US$29bn) were dominantly driven by greater India
allocation in multi country funds (see fig 2).
Of the US$237bn of FII AUM in India as on Dec-10, 74% (up 2 ppts YoY) of the
AUM is associated with multi country funds.
ETF selling has been marginal
FIIs have pulled out US$1.8bn from the Indian market YTD. We estimate that ETFs
sold US$105m worth of stock since Jan or 6.2% of the FII selling in the secondary
market (till 10th Feb 2011).
During 2010, ETFs had accounted for 19% of the net secondary market FII inflow.
Outflows in ADR focused ETF have caused decline in premiums
EEM US (iShares MSCI EM) has seen a large US$0.5b redemption over the last two
months. This fund largely invests in Indian ADRs only.
This has caused ADR premium on Wipro, HDFC Bank and Tata Motors to shrink
from average of 25% in Nov-10 to 15% now.
This fund is a large investor in India ADRs and still accounts for 9%, 32% and 6%
of the ADR float of HDFC Bank, Wipro and Tata Motors and more reduction in ADR
premium is possible if the fund witnesses more outflow.
ETF flows geared towards US equities
As of Jan-11, aggregate AUM of US-based ETFs is US$1trn out of which 47% is in
US equities, 26% in global/international equities and rest in other asset classes
During 2010, US-based ETFs saw net inflow US$119bn across all asset classes out
of which 1/3rd each was geared towards US and global/international equities.
However, Since Nov-10, ETFs have cumulatively invested US$40bn across all asset
classes, of which 80% is invested in US equities alone.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
It’s not the ETFs, again…
With macro concerns (inflation, infra slowdown etc) stepping up, FII
outflows have started from India. The total FII AUM in India at an all time
high of US$237bn as at Dec-10 doesn’t help. EM to DM trade is evident in
the ETF flow analysis with c.90% of all ETF inflows into US-based ETFs
going to US equities since the last two months (vis-à-vis only 32% in
CY10). In India, ETFs have accounted for only 6% of YTD FII outflows.
However, steep outflows by one ADR focussed fund ETF (EEM US) has
resulted in contraction of ADR/GDR premiums and the trend may
continue if the fund continues to see outflows.
FII’s India exposure close to all time high and can reverse
The large FII inflows in CY10 (US$29bn) were dominantly driven by greater India
allocation in multi country funds (see fig 2).
Of the US$237bn of FII AUM in India as on Dec-10, 74% (up 2 ppts YoY) of the
AUM is associated with multi country funds.
ETF selling has been marginal
FIIs have pulled out US$1.8bn from the Indian market YTD. We estimate that ETFs
sold US$105m worth of stock since Jan or 6.2% of the FII selling in the secondary
market (till 10th Feb 2011).
During 2010, ETFs had accounted for 19% of the net secondary market FII inflow.
Outflows in ADR focused ETF have caused decline in premiums
EEM US (iShares MSCI EM) has seen a large US$0.5b redemption over the last two
months. This fund largely invests in Indian ADRs only.
This has caused ADR premium on Wipro, HDFC Bank and Tata Motors to shrink
from average of 25% in Nov-10 to 15% now.
This fund is a large investor in India ADRs and still accounts for 9%, 32% and 6%
of the ADR float of HDFC Bank, Wipro and Tata Motors and more reduction in ADR
premium is possible if the fund witnesses more outflow.
ETF flows geared towards US equities
As of Jan-11, aggregate AUM of US-based ETFs is US$1trn out of which 47% is in
US equities, 26% in global/international equities and rest in other asset classes
During 2010, US-based ETFs saw net inflow US$119bn across all asset classes out
of which 1/3rd each was geared towards US and global/international equities.
However, Since Nov-10, ETFs have cumulatively invested US$40bn across all asset
classes, of which 80% is invested in US equities alone.
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