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Simultaneous redemption in 95% of countries; Shifting of capital back into US now becoming a crowded trade

Just one week of relief and EM redemption pressure resumes; GEM funds saw outflow of $1.6bn this week after a small inflow of $382mn in the previous week. In the past 7 weeks (post US election results), $5.5bn have been pulled out of GEM funds. Importantly, foreigners pulled out money from most DMs too. Out of 41 countries (EM + DM), foreigners have pulled out funds from 39 regions this week and moved into the US. Besides US, Argentina was only other country to have positive foreign flow this week.

Among EMs, largest outflow was from China ($1.2bn), Taiwan ($480mn), India ($420mn), S. Korea ($242mn) and Mexico ($174mn). Within DMs, largest outflow was from UK ($800mn), France ($520mn), Germany ($500mn), Switzerland ($325mn) and Netherlands ($240mn). Most of this money continues to move into the US which saw 10 th week of strong foreign inflows. This week inflow of $8bn. US Smallcap flows also maintain momentum with another inflow of $2.4bn

This week, 95% of countries saw outflows; this is largest reading since Oct’22, Oct’23, Apr’24 and Aug’24. These were the phases which marked correlated panic in global equities indicating a crowded leg hence followed by a relief rally.

Pressure on India this week was more from allocation based flows while dedicated fund flow remained neutral. India saw outflow of $420mn this week out of which dedicated outflow was only $34mn. In past 10 weeks, total outflow from India funds was $2.5bn out of which $900mn was from dedicated funds (mostly US domiciled funds) while remaining $1.6bn outflow was on allocation shift (towards China and US)

High-yield bond prices are good gauge of global risk environment which is still strong. The NAV line for Global high yield bond funds is about to reach 2021 highs where the previous bond crises had started on back of surge in US yields.

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