Macquarie Research: Fund Flow Tracker -Dark before dawn

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Fund Flow Tracker
Dark before dawn
Local exchange data: risk aversion’s final spasm?
 Weekly net-selling in Asia ex-Japan took another dip... Following a week
of reduced net-selling, the aggregate of six Asian ex-Japan markets where
high-frequency data is available (ie, Korea, Taiwan, India, Thailand, Indonesia
and the Philippines) again recorded deeper weekly net-selling – to -
US$1.96bn for the week ending Wednesday, 2 March. This was driven by (oildependent)
Taiwan, Korea and India, which respectively recorded -US$747m,
-US$694m and -US$524m in net-sales. Last week's net-buying in the TIPs
region lost momentum this week (falling to just US$4m vs US$399m the week
before) – primarily dragged by 1) the -US$40m net-selling in Indonesia, vs last
week’s net-buying of US$100m; and 2) moderating net-buying in Thailand of
US$32m vs US$307m last week.

 …although very latest data points suggest a rebound. As of mid-day
Friday, data on net-purchase of equities by foreign investors for Thursday,
3 March (which falls outside this report's Thursday–Wednesday “data week”)
became available for Taiwan, Korea, Indonesia, Philippines and Thailand. Of
these, the first three recorded net-positive single-day foreign purchases.
 Weekly foreign net-buying in Japan slows significantly. For the week
ending 23 February, foreign net-buying in Japan slowed to US$125m, well
below both the previous week’s US$5.8bn and the YTD average of US$2.3bn.
 All three frontier markets were net-sold. Amid heightened risk aversion,
Pakistan recorded weekly foreign net-selling (of -US$1.5m) for the first time
since June 2010. Weekly net-selling in Sri-Lanka was largely unchanged
(-US$5.7m vs the previous week's -US$5.9m), while Vietnam saw net-selling
moderate to -US$1.6m from -US$4.6m the week before.
Fund subscription data: into Taiwan, out of safe-haven Japan
 GEM redemptions for the sixth straight week. GEM funds received weekly
net-redemptions of -US$1.56bn (vs -US$1.08bn the week before) against the
backdrop of ongoing instability in the Middle East and North Africa. This
brings total redemptions since 19 January (of US$14.2bn) to almost 24% of
the cumulative net-subscriptions since January 2010 – a magnitude of
redemptions that we suspect is itself unsustainable.
 Emerging Asia: Taiwan and Greater China funds picked up. Net-redemptions
at Asia ex-Japan regional funds eased slightly to -US$631m from -US$781m, but
are still below the YTD average of -US$486m. Selective single-country funds saw
improvement in net-subscriptions: Taiwan-dedicated funds received weekly netsubscriptions
of US$99m after US$21m last week; and Greater China funds
received US$68m vs net-redemptions -of US$44m last week.
 Developed Asia: Japan in net-redemptions. Following 13 weeks of
continuous net-subscriptions, Japan-focused funds – seen by many investors
as a regional "safe haven" from inflation and EM risks – received netredemptions
of -US$307m, vs a positive YTD average of US$361m. On the
other hand, Asia-Pacific funds (which combine Japan, Australia and New
Zealand with emerging Asia) saw net-positive weekly subscriptions of
US$6.2m, compared to redemptions of -US$70m the week before.