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Strategy
Foreign fund-flow tracker
Eleven consecutive weeks of outflows as allocations drop. KIE’s foreign fund-flow
tracker gives us a comprehensive view of market flow activity in India and among its
emerging market peers. Using a top-down approach, we analyze country flows and the
underlying factors which affect them, such as fund flows and country allocations for
different fund types.
Country flows: ETFs have contributed ~23% of total outflows in the past three months
India has witnessed outflows worth US$463 mn in the last month taking the three month tally to
~US$2 bn. Of this, ETFs have contributed to ~23% of the total outflows (US$487 mn) with the
likes of WisdomTree India Earnings Fund and Lyxor MSCI India ETF being the biggest contributors.
On a proportional basis (country flows as a % of total estimated assets), Indian outflows were the
second highest in our EM universe in the past three months. During the same period, Russia and
China have seen outflows worth US$3.8 bn and US$3.2 bn, respectively. The re-emergence of the
European sovereign debt crisis during the month has brought down net asset allocations by 10-
15% in our EM universe. Interesting to note—the fall in ETF net asset allocations exceeded the
total fall in allocations.
Country allocations: India allocations in Asia ex-Japan down to 10.3% as cash balance rises
Asia ex-Japan and BRIC funds saw cash balances rise to 3.1% and 2.5%, respectively, in August.
Within Asia ex-Japan funds, allocations to India fell further to 10.3% from 10.5% in July even as
valuations trended lower. BRIC funds saw a significant reduction in allocations to China (down
2.2% in three months), while Asia ex-Japan funds reduced allocations to Taiwan by 0.8% during
the same period.
Fund flows: Vanguard MSCI EM ETF continues to be the preferred EM-dedicated ETF
Vanguard MSCI EM ETF saw another inflow of US$1.6 bn in the past month even as five out of
the 10 largest outflows witnessed in the EM universe in the last month were from ETFs. On the
back of SFC’s modifications of collateral requirements for Hong Kong-based synthetic ETFs,
synthetic ETFs like iShares FTSE China 25 Index saw among of the largest outflows in the Asia
ex-Japan universe of funds. The fund saw an outflow of US$327 mn which was equivalent to
~5.4% of the total fund size (US$5.2 bn). Another interesting observation in the ETF space was
the large inflows into Direxion Daily Emerging Markets Bull 3x in the past 12 weeks, indicating the
use of leveraged ETFs by speculators in order to play volatile emerging markets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
Foreign fund-flow tracker
Eleven consecutive weeks of outflows as allocations drop. KIE’s foreign fund-flow
tracker gives us a comprehensive view of market flow activity in India and among its
emerging market peers. Using a top-down approach, we analyze country flows and the
underlying factors which affect them, such as fund flows and country allocations for
different fund types.
Country flows: ETFs have contributed ~23% of total outflows in the past three months
India has witnessed outflows worth US$463 mn in the last month taking the three month tally to
~US$2 bn. Of this, ETFs have contributed to ~23% of the total outflows (US$487 mn) with the
likes of WisdomTree India Earnings Fund and Lyxor MSCI India ETF being the biggest contributors.
On a proportional basis (country flows as a % of total estimated assets), Indian outflows were the
second highest in our EM universe in the past three months. During the same period, Russia and
China have seen outflows worth US$3.8 bn and US$3.2 bn, respectively. The re-emergence of the
European sovereign debt crisis during the month has brought down net asset allocations by 10-
15% in our EM universe. Interesting to note—the fall in ETF net asset allocations exceeded the
total fall in allocations.
Country allocations: India allocations in Asia ex-Japan down to 10.3% as cash balance rises
Asia ex-Japan and BRIC funds saw cash balances rise to 3.1% and 2.5%, respectively, in August.
Within Asia ex-Japan funds, allocations to India fell further to 10.3% from 10.5% in July even as
valuations trended lower. BRIC funds saw a significant reduction in allocations to China (down
2.2% in three months), while Asia ex-Japan funds reduced allocations to Taiwan by 0.8% during
the same period.
Fund flows: Vanguard MSCI EM ETF continues to be the preferred EM-dedicated ETF
Vanguard MSCI EM ETF saw another inflow of US$1.6 bn in the past month even as five out of
the 10 largest outflows witnessed in the EM universe in the last month were from ETFs. On the
back of SFC’s modifications of collateral requirements for Hong Kong-based synthetic ETFs,
synthetic ETFs like iShares FTSE China 25 Index saw among of the largest outflows in the Asia
ex-Japan universe of funds. The fund saw an outflow of US$327 mn which was equivalent to
~5.4% of the total fund size (US$5.2 bn). Another interesting observation in the ETF space was
the large inflows into Direxion Daily Emerging Markets Bull 3x in the past 12 weeks, indicating the
use of leveraged ETFs by speculators in order to play volatile emerging markets.
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