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According to ANZ analysts, the escalation in US-China trade tensions and mounting concerns about global growth led to broad-based foreign equity outflows from EM Asia ex-China.

Key Quotes

“Northbound Stockconnect flows stayed positive, thanks to the increase in China’s A-shares weighting in the MSCI EM Indexes.”

“Although bond inflows were recorded for the fourth consecutive month, they were very mixed. Yield demand remained strong in India but not in Indonesia. Rate cut expectations helped bolster inflows into South Korean bonds. China bonds continue to benefit from index inclusion.”

“Just as September started off with a risk-off theme, news of Hong Kong formally dropping the extradition bill, JP Morgan announcing inclusion of China bonds into the GBI-EM index and confirmation that the US and China will hold trade talks in October saw a turnaround. Flows look set to remain volatile and reactive to ongoing trade and geopolitical developments.”