Global Funds Outlook | First Quarter 2020

Summary

Global Investment Funds closed a turbulent 2019 on an optimistic note, with market’s regaining risk-on mood post US-China trade truce, lower Brexit uncertainty and signs of growth stabilization. Looking ahead, we expect EM inflows to continue during 1H20, albeit at a moderating pace post 1Q20 as uncertainties persist.

Key points

• Key points:
• EM equity funds have been the biggest beneficiaries of investors’ risk-on mood while hard as well as local currency bond inflows have improved.
• Appetite for European, but not US, debt has clearly moderated; and there seems little appetite for equity funds in DMs.
• Limited scope for further monetary policy easing as well as ebbing uncertainty weighs on sovereign bonds while improving prospects of growth pick up supports global high yield bonds.
• Our investment mood index reflects a significant improvement in market sentiment over the past month.
• While the near term outlook for EM inflows remains positive, underlying concerns over potential disruptions caused by geopolitical conflicts, trade tensions and social protests will limit sharp incremental gains in EM inflows. Furthermore, policy uncertainty could resurface in the run up to the US elections.

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