Analysts at the Australia and New Zealand Banking Group (ANZ) discuss the relative importance of portfolio flows into the Emerging Markets (EM) Asia to the trade war between the United States (US) and China.
Key quotes
“With no further progress on the US-China ‘phase one’ deal, foreign inflows into EM Asia ex-China slowed in November. Taiwan and India continued to dominate inflows in the equity space.”
“South Korean assets suffered the largest monthly foreign portfolio outflow since August 2011. Foreign investors pulled USD3.0bn out of Korean equities, with a further USD1.5bn in outflows seen from the debt market.”
“It was a mixed bag for debt inflows, as the region’s easing cycle starts to draw to a close, and signs of stabilization in growth appear. Foreign demand for onshore Chinese assets stayed strong.”
“How portfolio flows end the year will hinge on whether the scheduled 15 December tariff increase on Chinese goods will be suspended by the US even if no deal is reached by then. A collapse in trade talks remains a tail risk event.”
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