IGM Credit, IGM FX and Rates

China Insight: What Signals Did Q2 Monetary Policy Report Give?

The PBOC released its Q2 monetary policy report (MPR) on Thursday. The report sounds a bit hawkish, quite consistent with recent policy communications such as the recent Politburo meeting statement. As per the report, PBOC would make its prudent monetary policy more flexible and targeted, and keep liquidity appropriately ample to support economic recovery. It is particularly worth noting that PBOC in the report said excessively low interest rates will lead to misallocation of resources. That's the first time PBOC has talked about the possible negative(s) of low interest rate policy since the counter-pandemic stimulus introduced in Q1. Signals now become much clearer: PBOC has no intention to make further broad-based reductions in interest rates or the RRR. In regard to interest rates, PBOC specifically said it would "guide market interest rates to smoothly operate around OMO (open market operations) and MLF (Medium-term lending facility) rates". That means PBOC would prevent repo rates from deviating significantly from the OMO rates. As such, there is a good chance the interbank 7-day repo rate will keep seesawing in a 2.10-2.30% range during most of Q3 if PBOC keeps the 7-day OMO rate unchanged at 2.20%.

EPFR - fund flow & allocations data

Flows to SRI/ESG Equity Funds stumble in early August as investors remain on the defensive

Fund flows during the first week of August largely followed the pattern of late July as investors kept their heads down while they digested earnings reports and waited to see what kind of fiscal package will emerge from a divided US Congress. US Bond Funds posted their 18th consecutive inflow, flows to Money Market Funds were positive for the fourth time in the past five weeks and both Japan Equity and Gold Funds attracted solid amounts of fresh money while Emerging Markets Equity Funds posted their 24th outflow in the past 25 weeks and US Equity Funds their sixth in the past seven weeks. Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates posted a rare outflow. It is only their second since the beginning of last year and comes as the growing focus on the SRI/ESG theme has intensified the debate over the right definitions, criteria and standards for funds operating in this space. Year-to-date the SRI/ESG Equity and Bond Funds tracked by EPFR have attracted over $100 billion.

EPFR - fund flow & allocations data

EPFR Market Intelligence Fund Focus Webinar

EPFR - fund flow & allocations data

Quants Corner - Stock flows: Building the best mouse trap

EPFR has a long history of helping clients understand where money is moving and how fund managers are investing that money. These insights started at the regional, country and sector level. In recent years, this coverage has been extended to the industry and single security level...

Zephyr Portfolio Analytics

Ryan Nauman's Weekly Recap: COVID-19 Market Edition 08.03.20

The week ahead is another busy week for earnings releases. The week may not have as many blue-chip names as this week, but it does include companies that were hindered by the economic shutdown like Walt Disney, Wynn Resorts, and TripAdvisor. On the flip side, the week includes some companies who may have benefited from the shelter-in-place trade such as Square, Roku and Clorox. As for economic releases, the headliner will be Friday’s jobs report. After the initial spike in unemployment, the labor market rebounded the past two months. However, the number of new coronavirus cases has been on the rise and resulted in some new restrictions on businesses, which may again adversely affect employment numbers. Ryan Nauman's Weekly Recap: COVID-19 Market Edition and subscribe to have it delivered to your inbox each week!

IGM FX and Rates

FX Viewpoint – Seasonality in August?

It's easy to assume August will be quiet given summer holidays impaired trade in the Northern Hemisphere, but that of course can bring thinner trade, which in turn can exacerbate moves and direction. So, what is the reality? How does the Dollar tend to perform during the month and are there any G10s that seem to perform particularly well/badly through August? For more read our FX Viewpoint Blog >

IGM Credit, IGM FX and Rates

China Insight: Politburo Re-affirmed Bias in Favour of Less Dovish Policy

Xinhua News Agency reported the Politburo held a meeting on the economy on 30 July (Thursday). The CCP also held a meeting with non-CCP political parties and non-political representatives. President Xi chaired both meetings. Compared to the meeting held on 17 April, we note some changes in wording were made to the remarks on monetary and fiscal policies in the 30 July meeting. 30 July meeting (as per Xinhua News Agency): - "While requiring full implementation of macro policies, the meeting called for pursuing a more proactive and effective fiscal policy that delivers solid outcomes, and a more flexible and appropriate monetary policy that targets sound results, according to the meeting". 17 April Meeting (as per Xinhua News Agency): - "Monetary policies should be more flexible and balanced and instruments such as reserve requirement ratio cuts, interest rate reductions and reloans should be fully leveraged to ensure reasonable and sufficient liquidity and a lower interest rate in the loan market, the meeting said, stressing the need to channel capital into the real economy, especially medium-sized, small and micro enterprises".

IGM Credit, IGM FX and Rates

The Context 08.03.20

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Zephyr Portfolio Analytics

Zephyr Platform Case Study: Thrivent

Thrivent has been a client since 2020 and subscribes to the Zephyr platform. Matthew Mast, FIC, MBA is a Financial Professional for Thrivent and is responsible for due diligence on model portfolios, creating current versus proposed client portfolios to show clients where Thrivent can add value, and preparing materials for client meetings. Mr. Mast first experienced Zephyr at a previous firm. A Senior Advisor colleague used it extensively and, “loved it.” When Mr. Mast moved to take a leadership role at Thrivent, he knew Zephyr would be a valuable addition to support their in‐depth due diligence process and their communication with clients. “The functionality and presentation of Zephyr are fantastic. We like that you can create blends, measure them, and put together a very nice-looking, custom presentation that packages our thinking and really shows the value we bring our clients.” Read more...

EPFR - fund flow & allocations data

As sobering data piles up, shape of predicted recovery changing for the worse

Going into August, investors hoping for a V-shaped recovery from the economic downturn triggered by the COVID-19 pandemic found themselves looking for new letters – W, U, L and K all have their advocates – as data from the US and Europe suggested the rebound that started in mid-2Q20 is losing momentum. Mutual investors responded by focusing on cash, precious metals and asset classes where there is a central bank acting as buyer of last resort. US Bond, Gold and Japanese Equity Funds all recorded healthy inflows during the week ending July 28th and Money Market Funds posted consecutive weekly inflows for the first time since early May.

Zephyr Portfolio Analytics

Ryan Nauman's Weekly Recap: COVID-19 Market Edition 07.27.20

The week ahead is one of the busiest weeks of the Q2 earnings season which includes some of the largest and most popular traded companies. The releases that I am particularly intrigued by are Apple, Amazon.com, Alphabet and Caterpillar. As for economic data, the first iteration of second quarter GDP will be released, which is expected to show the worst contraction in economic growth since the Great Financial Crisis. The additional item I will be closely watching and listening to will be the FOMC meeting announcement and Chairman Powell’s follow-up press conference. Very few expect the FOMC to make adjustments to its monetary policies, however, their comments about the future path of their policies, the health of the U.S. economy, and the end of the CARES Act will be closely watched. Ryan Nauman's Weekly Recap: COVID-19 Market Edition and subscribe to have it delivered to your inbox each week!

IGM Credit, IGM FX and Rates

China Insight: Xi Has Strong Preference For Monetary Policy Normalisation

In a key speech delivered at a symposium with corporate leaders in Beijing on Tuesday (21 July). President Xi (as per China Daily) urged better implementation of aid packages for businesses, with steps to enforce a more proactive fiscal policy and more prudent and flexible monetary policy to ensure macro policies are more targeted and effective, adding that China will continue with measures to cut taxes, fees, rents and interest rates and ensure its various aid measures can be channeled directly to the grassroots and benefit market players. Before that, President Xi at a meeting on 22 Feb (5 months ago) pledged to exercise more flexibility in monetary easing. The word "prudent" re-appeared in Xi's speech on Tuesday, echoing PBOC's bias in favour of a normalisation of the monetary policy.

IGM FX and Rates

EM Viewpoint: CLP may start to lose out as political risk increases

The Chilean Peso has been Latin America's best-performing currency this year. That said, as we turn to assess the mid-term outlook for the CLP after a tumultuous year, our view is that risks are tilted towards renewed CLP weakness as investors brace for the return of political risk. For more read our EM Viewpoint Blog >

IGM Credit, IGM FX and Rates

The Context 07.27.20

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EPFR - fund flow & allocations data

Equity Fund flows proving hard to stimulate

The third week of July saw European leaders agree on a $830 billion ‘rescue fund’ and the Nasdaq Index hit a new record high while US lawmakers negotiated the outlines of what would be a fifth fiscal package to combat the impact of the COVID-19 pandemic. But these developments drew a stronger reaction from fixed income investors, with EPFR-tracked Bond Funds posting their third largest weekly inflow year-to-date – and on record -- while Equity Funds collectively chalked up their fourth outflow in the past six weeks. Equity Fund groups dedicated to popular sectors continue to attract fresh money, as do those with socially responsible (SRI) or environmental, social and governance (ESG) mandates. But, as was the case during the second quarter, the list of top money magnets quarter-to-date is dominated by fixed income and cash management fund groups. However, two Equity Fund groups that were in the bottom 10 during 2Q20, Global and China Equity Funds, are currently in the top 10 QTD.