Fun with Flows - Sustained Outflows from GEM - Citigroup

 Continued outflows from EM funds, but at a slower rate — Redemptions from all EM funds slowed to US$3bn for the week ended Wednesday, half the size of previous week. Note that we have added a new page (see page 3) to show the breakdown of ETF and non ETF flows. Recent outflows from GEM funds were largely focused on ETFs. Historically, outflows from GEM ETFs led non-ETFs by about two weeks. This suggests that redemptions may broaden to non-ETFs in the coming weeks. Also, our GEM strategist, Geoffrey Dennis, pointed out that once begun, outflows lasted about 6-8 weeks historically. We are in the 3rd week of the outflows, which will probably extend for few more weeks.

 The trades of DM over EM and North Asia over ASEAN remained — Flow patterns broadly continued from January to February. Developed markets and Japan remained the winners amid the current inflation fear trade. Within AxJ, Taiwan, Korea and Hong Kong fared better than South Asian countries. We believe that the trade of North against South Asia still has some way to go, extending 6.6% YTD outperformance.

 Japan accumulated US$3.4bn since the start of BoJ buying — This represented about 9% of AUM according to EFPR. Buying into Japan equity funds picked up again this week after some slowdown, driven by accelerated ETF buying.