Tightening US monetary policy stokes prospect for portfolio flow exodus
In today’s cut-out of our core strategy document—The Nigeria Strategy Report, we review movements in FPI flows across global financial markets over H2 16. In particular, we examine the impact of rising US interest rates, a firming US dollar and persisting current account imbalances across several EM countries on capital flows in the global market. We also outline our expectations for the portfolio flows across major regions in 2017.
In contrast to positive readings over the last two quarters (Q2 16: $26.4 billion, Q3 16: $41.7 billion), net foreign portfolio investment (FPI) flows to emerging markets (EM) turned negative in Q4 16 ($38.4 billion, highest outflow since Q4 2008) as investors responded to rising US interest rates and a strengthening US dollar in the aftermath of Donald Trump’s victory at the US presidential elections. Though commodity prices have started to recover, which should have resulted in more upbeat assessment of EM growth fundamentals, the rising voter backlash against globalization and upswing in populist anti-trade rhetoric, as encapsulated by the Brexit, Trump and Italian poll results suggest investors anxiety over EM economies, which benefitted from free global trade over the last decade. Overall, the Q4 16 numbers place YTD FPI flows 42.3% lower YoY at $27.7 billion.​
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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