June 16, 2015

The Institute of International Finance today announced that Clay Berry will join as Chief Economist for Europe effective August 17.

Berry currently serves as the U.S. Department of the Treasury’s Financial Attaché in Moscow. Berry represents the Treasury Department in Russia and the Commonwealth of Independent States (CIS), advancing the Treasury’s interests in the region.

“Developments in Europe, especially Emerging Europe, will be a dominant theme in the global economy for the foreseeable future,” said Tim Adams, president and CEO of the IIF. “Clay’s experience and contacts throughout the region will be a vital asset to the IIF and its members.”

June 10, 2015

Emerging market GDP growth likely accelerated in 2015Q2 after having fallen to a six-year low in Q1 according to the latest update of the IIF's EM Coincident Indicator. The EMCI showed an increase to 2.2 percent in May, up from 1.6 percent in April.

“We’ve begun to see a more positive trend in emerging market growth since the steep decline observed since last autumn,” said Kristina Morkunaite, lead author of the report. “This underpins hope that EM growth will pick up in Q2, having reached a six-year low in the first quarter of 2015.”

June 9, 2015

The Institute of International Finance today announced the opening of a new European Representative Office in London.

“Europe continues to play a large role in the global financial system and within our membership,” said Tim Adams, president and CEO of the IIF. “Opening this office will allow us to better serve our members in the region and more closely engage with key global regulatory bodies.”

June 3, 2015

The European Central Bank Governing Council reviewed a brightening landscape at today’s monetary policy meeting as financial conditions remain favorable, real economy indicators are solid and inflation has picked up, according to the IIF’s updated “Draghi’s Dashboard”.

“Our inflation sub-index is finally climbing out of ‘red’ territory, as headline inflation seems to have bottomed out and is now on the right track – a signal that was reinforced by Tuesday’s report of an acceleration in Euro Area core inflation in May,” said Sonja Gibbs, Director of Capital Markets at the IIF. “The rise in our sub-index also reflects a welcome increase in long-term inflation expectations.”

June 2, 2015

Against a backdrop of bank deleveraging, years of ultra-low rates, and government efforts to develop corporate bond markets, there has been a notable shift in the funding mix of the global corporate sector towards bond financing, according to the latest Capital Markets Monitor from the Institute of International Finance.

“One of the key vulnerabilities exacerbating the financial crisis was high levels of leverage in many banking systems,” said Hung Tran, executive managing director at the IIF. “Consequently, an important component of global financial regulatory reform has been to reduce leverage in banks, through measures such as capital requirements and leverage ratios. However, there has been growing concern over the past few years that leverage has been migrating from banks to non-banks including the corporate and household sectors, both in mature and emerging economies.”

May 28, 2015

Capital flows to emerging markets are projected to slow to $981 billion in 2015, their lowest level since 2009, according to the IIF’s May report on Capital Flows to Emerging Markets.

“Weak EM growth performance is taking a heavy toll on capital inflows to EMs, which we now estimate at only $150 billion in Q1 2015, the lowest rate in six years”, said Charles Collyns, chief economist at the IIF. “We do project a moderate pickup of flows later in 2015 and 2016, but this depends on some strengthening of growth and no surprises from the Fed. Continued economic weakness or a bumpy Fed ride could lead to further stagnation of EM capital inflows.”

 “A deterioration of secondary market liquidity and increased corporate indebtedness across emerging markets could exacerbate the fallout from a potential EM stress event,” said Hung Tran, executive managing director at the IIF. “In an environment of rising global interest rates, Fed tightening, EM currency depreciation, and slowing economic growth and capital flows, USD-denominated debt may become more difficult for many EM non-financial corporate companies to service and refinance their debt.”

May 19, 2015

Emerging market portfolio flows have suffered a significant retrenchment since early May, according to the first issue of the IIF Flows Alert.

“EM outflows seem to have been triggered by the fallout from the global bond tantrum,” said Charles Collyns, chief economist at the IIF. “Even though the impact on EM spreads has been fairly limited so far, our data shows that the jump in global market interest rates has spilled over into portfolio outflows from emerging markets.”

IIF Flows Alerts are an early warning system that is based on daily portfolio flows to 7 EMs, including India, Indonesia, Korea, Thailand, South Africa, Brazil, and Hungary. Collectively, these countries suffered outflows of $3.2 billion in the first half of May. The reversal was broad-based, affecting all countries except Brazil.

May 18, 2015

The Institute of International Finance today issued the following statement on discussions between the Ukrainian government and the bondholder committee.  

“On May 12, 2015, Ukraine's Ministry of Finance posted a statement in its website referring to the IIF Principles of transparency and disclosure, in the context of its discussion with the bondholder committee about a restructuring of its international debt obligations.”

May 13, 2015

Emerging market GDP growth is on track to decline further in Q2 to 1.6 percent from 1.9 percent in Q1, according to the April update of the IIF’s EM Coincident Indicator. This marks the weakest reading since spring of 2009.

“Emerging markets started Q2 on a very weak note, with a downshift in both real activity and business surveys,” said Kristina Morkunaite, lead author of the report. “However, the pace of deceleration has at least eased, and a pickup in financial market variables provides grounds for cautious optimism that the downturn has now almost run its course.”

May 6, 2015

Global fund investors have increased exposure to emerging markets in April, according to the IIF’s latest Trends in Investment Fund Portfolio Allocation report.

“Fund portfolio weights for emerging market equities and fixed income securities increased modestly in April”, noted Sonja Gibbs, director of capital and emerging markets policy at the IIF. “U.S. investors have been the most important source of EM bond and equity fund investment in recent weeks, while in their quest for yield, Euro Area investors continued to favor emerging market funds over emerging market equity funds.”

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Dylan Riddle

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