Originally published by AxiTrader
Key Takeaway
As data for emerging markets and the BRIC countries continues to solidly outperform expectations currencies have strengthened and stocks have soared. That's also emboldened investors to start to pour money back into emerging markets.
The latest report from Boston-based EPFR Global released Friday showed that the particular subset of emerging markets known as BRIC - Brazil, Russia, India, and China - have seen fund inflows into stock funds for these nations over the past few weeks.
What You Need To Know
For the most part the acute fear and weakness for emerging market currencies and fund flows that accompanied the election of US president Trump on worries about punitive trade wars and increased economic uncertainty have dissipated over recent weeks.
That's likely because even though there was an initial flurry of executive orders from the White House its actions on the trade front so far have been less aggressive than the talk. That's allowed room for the significant outperformance of economic data being released by the BRICs and emerging markets more broadly to catch the eye of investors and traders.
Importantly that has allowed room for the significant outperformance of economic data being released by the BRICs and emerging markets more broadly to catch the eye of investors and traders.
What's amazing about the improvement in data is that it was almost perfectly synchronous with the election of Donald Trump. But it's taken some time to filter through. No doubt part of that reflects too much pessimism in economic forecasts.
Reuters reported over the weekend that the latest EPRF data shows "funds dedicated to the BRIC cohort - Brazil, Russia, India and China - had received $45 million so far in 2017 from investors, taking in $16.7 million in the past week and $29 million the week before".
Importantly the data shows this two week positive flow is the first time BRICs have attracted net cash over consecutive weeks in 5 months.
So it's a big deal - money appears to be moving back into risk assets in emerging markets. Even if it is just for two weeks.
Should it continue it will likely have continued positive implications for emerging market currencies. But the flows are so small at the moment, and the two week time frame so small that this is a trickle not a flood.
But it's a trend that is worth watching because what it says about global sentiment more broadly.
At present I can't square it with the rally in gold and bonds. But then that is the story of 2017 so far. markets are decoupling a little and correlations are not as strong as they were over the past couple of years.
Have a great day's trading.