Quotes from UniCredit Research:
-Dedicated EM bond funds' outflows accelerated to USD 1,966mn in the week ending 17 December, almost twice the size of the outflow from the previous week. This is the largest one-week outflow since the week ending on 5 February 2014. Again, it was hard-currency bonds which suffered the most with outflows of USD 1,016mn, representing the highest weekly outflow since 23 October 2013. Local-currency bond outflows more than doubled since last week with total outflows of USD 984mn.
-Blend-currency funds were more stable with small inflows of USD 34mn. These outflows have turned total flows into emerging market bond funds negative on the year – currently, total outflows are USD 688mn. Blend-currency funds continue to benefit from inflows, which is in contrast to hard-currency funds where, in the last three weeks, support has turned increasingly negative. The last three weeks of outflows to hard-currency bonds total USD 2,004mn. Outflows to local-currency bond funds have also picked up in recent weeks taking total outflows for the year up to USD 8.7bn.
-The outflows were likely driven, in part, by the turmoil in Russia as the ruble depreciated over 10% in the week ending 17 December. This had a spillover effect on the rest of CEE with HUF and TRY selling off over 300bp while the PLN deteriorated over 200bp. The volatility in Europe came after a large selloff among the LatAm currencies in the previous week. Consequently, there was slightly more stability among most LatAm currencies, although the BRL continues to weaken. In Asia, performance was more mixed with the KRW rebounding a touch but both INR and IRD were down an additional 250bp.
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