More Than One Way to Skin the Liquidity Cat

- Asia: Investors’ concerns about excessive equity issuance are overdone — "Even if all the currently planned equity is issued, it would represent a mere 2.6% of the region’s market cap (vs. historical high of 5.3%) or 1.7% of all bank deposits. Nor is equity issuance a reliable indicator of future market performance. Equity issuance is concentrated in China, Korea and India, and sector-wise, in banks, industrials and materials."
- Taiwan: ECFA Favors the Banks — "For the banks, while the profit impact from China would be 3-5 years, a capex recovery – partly catalyzed by ECFA – could generate improving margins and loan growth in the early years."
- Thailand: Entering A Virtuous Cycle — "Thailand looks to be entering a virtuous cycle with growth engines firing on all cylinders. This is not cyclical, in our view, but a multi-year secular growth story after years of disappointing politics."
- Fun with Flows: Flows weaken — "Inflows to all emerging market equity funds fell to US$949m last week vs. an average of US$2.3b/week in prior two weeks. While redemptions from LatAm funds tripled WoW, flows to EMEA funds turned negative for the first time in four weeks. Inflows to GEM funds, which were remarkably strong earlier, trailed Asian equity funds by 23%. As for developed markets, outflows from Global and Japan funds rose to the highest level in five weeks, totaling US$1.2b."
- Market Sentiment — "Sentiment has been mixed among Asian markets. Risk appetite in India has improved the most since mid June, while our sentiment indicators for Hong Kong, Korea and Singapore have hardly moved, suggesting that investors remain skeptical on the investment outlook. In Taiwan and Malaysia, risk tolerance levels are now below historical averages."
Citigroup Asia Investigator 20100706

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