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Capital Markets Monitor: Monetary Uncertainty and Emerging Markets March 31, 2015 - 5:07pm

■ Uncertainty about how and when the Fed will engineer an increase in the Fed funds rate has led to a notable rise in volatility in the U.S. rate market.

■ Against this backdrop, and with further U.S. dollar strength in prospect, portfolio capital flows to emerging markets have been subdued—but with a high degree of differentiation. EM countries that have implemented sensible macroeconomic policies with a reasonable reform agenda to boost economic potential have been much more resilient—good policy pays off.

■ However, the corporate sector in many emerging market countries now has significant USD liabilities, in both bank loans and bonds. While some of this exposure may be effectively hedged, a number of EM countries are likely to face daunting debt servicing and refinancing risks in the next few years.

Corporate Debt in Emerging Markets: What should we be worried about? March 31, 2015 - 6:56pm

* Emerging market non-financial corporate debt reached a record high of 83% of GDP in 2014, up from 67% in 2009.

* China, Turkey and Brazil have seen the largest increases in non-financial corporate indebtedness. Robust bond issuance and foreign bank lending in China and strong local domestic credit expansion in Turkey and Brazil have all contributed to this marked rise.

* The size of the EM non-financial corporate bond market has doubled since 2009 to a record level of over $2.4 trillion in 2014. Since 2009, corporates have raised more than $1.7 trillion in bond markets. However, issuance has lost some momentum since 2013, while the share of foreign currency has risen.

* We estimate that some $645 billion of non-financial corporate debt will mature in emerging markets between 2015 and 2017, with USD-denominated bonds accounting for around $108 billion of that.

* With non-performing loans rising—and amid persistent USD strength—some EM banks, particularly those that have increased their foreign-currency lending to non-financial corporates in recent years, could face challenges.

Joint Associations’ Response to the Proposed Revisions to the BCBS Standardized Approach for Capital Floors March 27, 2015 - 5:26pm

The IIF, GFMA, the International Swaps and Derivatives Association (ISDA), and The Commercial Real Estate Finance Council (CREFC) provide comment to the Basel Committee on Banking Supervision (BCBS) on their December 2014 Consultative Document, “Capital Floors: the design of a framework based on standardized approaches”

The Associations support the work of the Committee and specifically of the Task Force for Simplicity and Comparability (TFSC) aimed at conducting a comprehensive review of the capital framework and its overall calibration and taking stock of the multiple changes thereto in the course of the past 5 years. The Associations are equally supportive of the Committee’s goal to remove undue complexity and improve the comparability of banks’ capital requirements. The Joint Associations welcome the opportunity to contribute to the discussion on capital floors.

Joint Associations’ Response to the Proposed Revisions to the BCBS Standardized Approach for Credit Risk March 27, 2015 - 5:29pm

The IIF, GFMA and IACPM responded to the proposed revisions to the credit risk standardized approach (SA) issued by the BCBS on December 2014. In their response, the Associations noted that the end-2015 deadline is not realistic given the issues in the proposed conceptual framework as well as the need to conduct a careful impact analysis to ensure appropriate calibration and impact assessment. It was also stressed that credit risk is the cornerstone of the BCBS capital framework and is the most important risk category for most banks, so a more thorough review is warranted. The Associations therefore requested to extend the timeline for this review beyond the planned end-2015 deadline.

Nevertheless, the Associations expressed their readiness and commitment to assisting the TFSA in completing its work. In this regard, the response offered some general remarks as well as detailed comments and alternatives on specific elements of the proposals. The Associations underscored that the extensive nature of the issues that remain to be resolved as well as the need to measure and test quantitatively many different alternatives reinforce the importance of continuing an active dialogue between the BCBS and the industry as the proposals are further developed.

Country/Regional Portfolio Flows Data March 27, 2015 - 4:41pm
CHILE: Database Summary March 27, 2015 - 3:19pm
CHILE: Full Economic Database March 27, 2015 - 3:18pm
BRAZIL: Database Summary March 27, 2015 - 2:43pm
BRAZIL: Full Economic Database March 27, 2015 - 2:42pm
UAE: Full Economic Database March 27, 2015 - 2:40pm
MOROCCO: Database Summary March 27, 2015 - 2:31pm
MOROCCO: Full Economic Database March 27, 2015 - 2:30pm
EGYPT: Database Summary March 27, 2015 - 2:35pm
EGYPT: Full Economic Database March 27, 2015 - 2:34pm
Weekly Insight: Emerging Markets in Focus March 26, 2015 - 10:17pm

* Global equities stumble
* Linking EM vulnerability and volatility with the IIF Heat Map
* EM portfolio flows dancing to the Fed’s tune
* Flash PMIs—optimism made in Europe

EM Portfolio Flows Remain Moderate in March March 26, 2015 - 2:59pm

Portfolio flows to emerging markets continued at a below-trend pace of $16 billion in March, nearly unchanged from the prior month, according to the latest EM Portfolio Flows Tracker by the Institute of International Finance.

"Portfolio flows have responded strongly to shifts in the outlook for Fed tightening later this year," said Charles Collyns, chief economist at the IIF. "After weak inflows in the first few weeks of March, emerging markets have benefitted from dovish signals by the Fed following the March FOMC meeting."

March 2015 EM Portfolio Flows Tracker March 26, 2015 - 1:45pm

Portfolio flows to emerging markets are estimated to have moderated to $16 billion in March, somewhat below the monthly average of $22 billion in recent years. Equity inflows rose to $10 billion, while debt inflows declined to $6 billion. On a regional basis, EM Asia was the largest recipient of inflows, followed by Latin America. Flows to EM Europe turned positive after 3 months of outflows.

IIF Response on Financial Oversight Council’s Notice: Asset Management Products and Activities March 26, 2015 - 10:11am

On March 25, 2015 the IIF submitted a response letter to the “Notice Seeking Comment on Asset Management Products and Activities” by the Financial Stability Oversight Council (FSOC). The IIF has consistently argued that policy in the area of regulation of systemic risk in asset management should focus primarily on the underlying activities. Thus, the IIF supports the FSOC’s inquiry in general. However, the IIF suggests to expand the scope of the inquiry to include all capital markets participants that might offer a given product or engage in an activity and underscore the need to base any policy in actual, demonstrable data and evidence. The response letter had been produced under the guidance of the IIF’s “Non-Bank Non-Insurer Working Group”.

Portfolio Flows Tracker Data March 26, 2015 - 1:30pm
TUNISIA: Database Summary March 26, 2015 - 5:22pm