Cameron Brandt, Director of Research, EPFR Global, says we should not read too much into the unusually frenetic current environment. Trump has learnt from his first term that he needs to hit the ground running before opposition solidifies and that is what he and his administration seem to be doing and they are doing it in a way which raises as many questions and answers on a day-to-day basis. There is a feeling that the best strategy is to put money in US assets and wait to see how things play out.I am not able to put the puzzle together. I have read that if the dollar goes up, money moves to the US. Dollar goes down, money comes back to emerging markets. Yields go up, money moves out of emerging markets. Yields go down, money moves back to emerging markets. Guess what? The dollar is down and yields have started correcting. Where are the flows?Cameron Brandt: Well, the short answer is that the pretty solid case for a number of emerging markets including India is simply drowned out by rather frenetic energy and scramble to get a fix on the Trump administration’s economic policies. Even though tariffs have been getting most of the attention, they have been pretty busy in a number of other areas. So, this is a slightly odd moment when even though the pieces fit together pointing to one direction, people are very much on hold right now. Flows this week by and large have been fairly lacklustre to most fund groups except those that are strongly tabbed to benefit from the policies that are expected from the Trump administration. My sense is not to read too much into the current environment. It is unusually frenetic, Trump has learnt from his first term that he needs to hit the ground running before opposition solidifies and that is what he and his administration seem to be doing and they are doing it in a way which raises as many questions and answers on a day-to-day basis. There is generally a feeling that the best strategy is to put money in US assets and wait to see how things play out.We have seen continued selling pressure, especially from FIIs, back home. Is this entirely about India versus China or are you of the view that this is a US versus EM battle and that is where the flows are going and that is why India is getting a fair share of FIIs selling?Cameron Brandt: I lean towards the latter, that it is a relative US versus India phenomenon. There really are very few corners of the world at the moment that are proving as attractive as the US and those are usually tied in some way to the US economic story as markets see it. So, Taiwan equity funds have been recording some good inflows recently but that is very much tied to the assumption that the US artificial intelligence (AI) story, DeepSeek notwithstanding, will continue to roar along. I would say that even with recent outflows from dedicated mutual funds, it is only a relatively modest fraction of the money that is poured in over the previous two years and there was always a likelihood that th
Ven. Feb 7th, 2025
