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1、Deutsche Bank Markets Research Emerging Markets Credit Sovereigns Date 5 February 2018 EM Debt: Technicals Monitor January 2018 _ Deutsche Bank Securities Inc. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. Jayant Gupta Strategist (+1) 904 271-3885 jayanth.gup
2、ta Rebecca Klausen Strategist (+44) 20 754-55173 rebecca.klausen Hongtao Jiang Strategist (+1) 212 250-2524 hongtao.jiang Summary: Technical conditions for EM credit remain supportive as inflows have been strong while funds positioning does not seem heavy (based on mutual fund beta) cushioning the i
3、mpact of a recent surge in supply. EM sovereigns sold USD37bn worth of bonds (or USD25bn in net supply) in January. With UST yields on the rise, we always expected issuance to be front loaded. But with new issuers likely to come to market, we have revised our total gross issuance projection for 2018
4、 to around USD160bn (net supply of USD70bn). Strong inflows in January Inflows in hard currency funds accelerated in January after witnessing a moderate pace during late 2017. Overall, EM hard currency funds absorbed in excess of USD5.7bn (2.5% AUM) in January, though the pace of inflow reduced duri
5、ng the week ending 31st January. During the same period, EM local and blended currency funds absorbed USD4.2bn (3% AUM) and USD1.2bn (2.3% AUM), respectively. Given negative total returns in the benchmark recently, we may see outflows in the coming week(s), but we believe outflows are unlikely to be
6、 sustained. Hard currency ETFs, whose AUM are 15% of the EPFR weekly flows total, had been a big contributor to the inflows (about 40%). However, ETF funds have witnessed outflows in excess of 1.5%AUM (ETF AUM: USD35bn) during the last week, which is further expected to accelerate this week after re
7、cent selloff. Outside the EM debt space, US High Yield funds continued to face significant redemptions with outflows in excess of -0.8%AUM, while US IG Corp funds added 0.8%AUM. Meanwhile, EM equity funds witnessed record inflows adding USD2.5bn (2%AUM). Issuers flooded the primary market As expecte
8、d, January saw a blizzard of new issuances with the Fed remaining on a hiking path, and issuers rushing to the primary market to lock in low coupons. Overall in January, EM sovereigns sold USD37bn worth of bonds in gross terms. In LatAm, Argentina (USD9bn), Brazil (USD1.5bn), Chile (USD3bn), Ecuador
9、 (USD3bn), and Mexico (USD2.6bn) came to the primary market, while in EMEA issuers were Israel (USD2bn), Oman (USD6.5bn), Poland (USD2bn), Slovenia (USD1.5bn), and Turkey (USD2bn). In Asia, Philippines raised USD2bn selling 10Ybond. We expect primary market to remain busy in the coming months given
10、issuance seasonality and expected Feds hikes. In terms of upcoming issuance pipeline, Egypt, Angola, Kenya, Qatar, Sri Lanka, Ghana, and Russia, among others are expected to come to the primary market in the first quarter (refer table on right). A heavy repayment schedule (USD21bn in principal and i
11、nterest to be repaid during the next three months), (anecdotally) high cash positions amongst funds, and likely continued inflows should help cushion the impact of the supplies. But with new issuers likely to come to market, we have revised our total gross issuance projection for 2018 to around USD1
12、60bn. Mutual fund beta gradually moving up (closer to 1) Our mutual fund beta that gauges the sensitivity of large funds performance against their benchmark indices gradually climbed up to 1 (market-weight) after falling down to 0.8(under-weight) towards the end of 2018. It is also worth noticing th
13、at the mutual fund beta fell from 1.2 (overweight) to 0.8 (underweight) in the last six weeks of 2017, suggesting funds preserve gains near year-end. Inflows surged in January -3.0 -2.0 -1.0 0.0 1.0 2.0 Jan-16Jul-16Jan-17Jul-17Jan-18 EM weekly flows Hard ccy 4wk MA Local ccy 4wk MA EM debt fund flow
14、s (% AUM) Source: EPFR, Deutsche Bank, EPFR Upcoming expected issuances Source: Deutsche Bank, Bloomberg. Mutual fund beta moving up 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 Jan-17Jul-17Jan-18 25%-75% RangeMedian Mavg(5day)Mutual Fund Beta Source: Deutsche Bank, EPFR Distributed on: 06
15、/02/2018 01:48:26 GMT 7T2se3r0Ot6kwoPa 5 February 2018 EM Debt: Technicals Monitor: January 2018 Page 2 Deutsche Bank Securities Inc. EMD fund flows EMD funds flow by Currency -30 -20 -10 0 10 20 30 40 Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17Jan-18 Hard currency Local currency Blended currency % AUM -3
16、-2 -1 0 1 2 3 Jan 15Jul 15Jan 16Jul 16Jan 17Jul 17Jan 18 Hard ccy weekly flows Hard ccy 4wk Mavg% AUM -3 -2 -1 0 1 2 3 Jan 15Jul 15Jan 16Jul 16Jan 17Jul 17Jan 18 Local ccy weekly flows Local ccy 4wk Mavg% AUM Hard currency flows by Source currency -20 -10 0 10 20 30 40 Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17Jan-18 Source ccy - USD Source ccy -EUR Source ccy -Others % AUM -3 -2
