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3 Jun 2015
AUD BoP: increased portfolio inflows – Nomura
FXStreet (Barcelona) - Australian Net portfolio flows showed the strongest inflows since Q1 2012, as foreign investors increased their equity purchases and bond inflows remained strong, likely owing to negative yields in the eurozone, shares Charles St-Arnaud, FX Strategist at Nomura.
Key Quotes
“Net portfolio flows showed net inflows of A$17.8bn in Q1, after net inflows of AU$11.9bn in Q4. This is the strongest net inflows since Q1 2012. Foreign investors bought A$31.4bn of Australian assets, higher than the A$25.0bn of inflows in Q4, with most of the purchases concentrated in bonds (+A$26.3bn), while inflows in equity rebounded to A$5.1bn. Most foreign bond purchases were in financial institution bonds (+A$13.1bn) and government bonds (+A$11.2bn), while inflows into other bonds were only slightly positive (A$2.0bn), after three consecutive months of outflows.”
“On the flip side, Australian investors purchased A$13.6bn of foreign assets, slightly less than in Q4. This is the third consecutive reduction in foreign purchases. The purchases were mainly in foreign bonds (A$14.3bn), especially financial institution bonds (+A$10.5bn), while there was some marginal selling of equity (A$0.7bn).”
“Despite a compression in the yield differential between ACGBs and USTs of about 30bp in Q1, demand for Australian bonds has remained solid because of the yields on Australian bonds. As such, strong inflows from foreign investors excluding Japan and the US could have been spurred by inflows from European investors or investors divesting from Europe in reaction to negative rates as a consequence of the ECB QE.”
“However, the strong inflows into Australian assets had little impact on AUD, as the currency remained more influenced by the terms of trade (i.e. lower commodity prices) than by flows.”
“On the equity side, the rebound in inflows in Q1, after some big outflows in Q4 resulting from the decline in commodity prices, likely explain the strong performance of the ASX early this year.”
Key Quotes
“Net portfolio flows showed net inflows of A$17.8bn in Q1, after net inflows of AU$11.9bn in Q4. This is the strongest net inflows since Q1 2012. Foreign investors bought A$31.4bn of Australian assets, higher than the A$25.0bn of inflows in Q4, with most of the purchases concentrated in bonds (+A$26.3bn), while inflows in equity rebounded to A$5.1bn. Most foreign bond purchases were in financial institution bonds (+A$13.1bn) and government bonds (+A$11.2bn), while inflows into other bonds were only slightly positive (A$2.0bn), after three consecutive months of outflows.”
“On the flip side, Australian investors purchased A$13.6bn of foreign assets, slightly less than in Q4. This is the third consecutive reduction in foreign purchases. The purchases were mainly in foreign bonds (A$14.3bn), especially financial institution bonds (+A$10.5bn), while there was some marginal selling of equity (A$0.7bn).”
“Despite a compression in the yield differential between ACGBs and USTs of about 30bp in Q1, demand for Australian bonds has remained solid because of the yields on Australian bonds. As such, strong inflows from foreign investors excluding Japan and the US could have been spurred by inflows from European investors or investors divesting from Europe in reaction to negative rates as a consequence of the ECB QE.”
“However, the strong inflows into Australian assets had little impact on AUD, as the currency remained more influenced by the terms of trade (i.e. lower commodity prices) than by flows.”
“On the equity side, the rebound in inflows in Q1, after some big outflows in Q4 resulting from the decline in commodity prices, likely explain the strong performance of the ASX early this year.”