Nigeria Strategy Report H2 2018 Excerpts- EM Portfolio flows: Slowing the flow, but far from a dribble
- At the start of the year, we projected some bouts of headwinds to emerging market portfolio flows, despite stable and growing global economy, higher commodity prices and improving fundamentals in key financial markets. First was our expectation of interest rate hike in the US, then was the projected scale back on QE by the ECB, and lastly was geopolitical risks, particularly trade protectionism policies. As posited, after a stout first quarter in 2018, that saw average net portfolios flows to Emerging markets (EM) touch a 3-quarter high of $19.9 billion, EMs flows fell short over the second quarter, reporting average net outflows of $6.2 billion.
- Over the rest of 2018, the confluence of several pull factors across DMs including sturdy DM growth picture and currencies, drive towards interest rate normalization, higher yields and ripple effect of escalating trade wars between US and China points to unabated portfolio outflows from EMs over 2018. However, the misery seems moderated as higher commodity prices for EM commodity exporters provides war chest for withstanding headwinds from the external front and boosting economic growth. In addition, the scale of outflows from EM debt market should be subdued as EM central banks are more inclined to switching from monetary easing to tightening with India and Turkey leading the way. As a result, the Institute of International Finance now projects a slight pull back in portfolio flows to emerging market (-12.5% YoY to $351billion) over 2018.
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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