HOUSE_OVERSIGHT_023593.jpg

Chart 38: YTD equity inflows into EM Asia are at the highest levels since 2004

[Chart displaying bar graph of YTD Foreign Equity Inflow into EM (US$bn) for years 2004-2017]
Values shown: 15, 8, 9, 14, -21, 17, 10, 4, 17, 24, 22, 23, 11, 28

Chart 39: Similar to that of global markets, Asian volatility is at its most depressed levels post-GFC

[Chart displaying line graph of Average 3M ATM Vol of HSI/KOSPI2/NKY vs Current (13.2%)]

Source: BofA Merrill Lynch Global Research, Bloomberg. Data as of 2-Jun-17
Foreign inflows into Korea, Taiwan, India, Indonesia, the Philippines, and Malaysia

Source: BofA Merrill Lynch Global Research. Data from 2-Jan-12 to 2-Jun-17

Notable trends and dislocations (Asia)
Asian equity markets saw modest gains last week, led by Japan’s NKY index, which increased 2.5% week-over-week. In fact, the index breached the 20,000 mark last Friday for the first time since December 2015. Gains were driven by foreign inflows from investors attracted to very strong corporate profits. Additionally, economic data from last week indicated that Japan’s unemployment rate held at a two-decade low, and capital spending during Q1 beat analyst estimates. The biggest contributor to last weeks’ return was Fast Retailing Co Ltd (9983 JT), which added 3.9% week-over-week. The company reported that same-store-sales for its Uniqlo stores rose 2.4% year-over-year in May due to successful strategies during the Golden Week and Mother’s Day holidays. After the NKY, last week’s second biggest gainer was Hong Kong’s HSI, which added 1.1%. The leading name in the index was Geely Automobile Holdings (175 HK), which jumped 19.8% week-over-week in response to optimism over its recent acquisition of a 49.9% stake in Proton Holdings. Hong Kong’s HSCEI saw a similar return as the index added 0.8% last week.

Next we turn to India, where the NIFTY gained 0.6% last week. The leading name in the index was Aurobindo Pharma (ARBP IS), which increased 11.4% week-over-week in response to an investor presentation which outlined the company’s plans to increase collaboration across its global customer business. Elsewhere in Asia, Korea’s KOSPI increased 0.3% week-over-week, Australia’s ASX added 0.6%, and Taiwan’s TWSE gained 0.5%.

Asian term structures were unchanged week-over-week at 3.8% on average
• Asian 3m ATM volatility increased on average 0.1 vol point to 12.6% last week, while 10 day realized vol fell on average 0.8 vol points to 8.6%. Notably, NIFTY’s implied vol increased 0.7 vol points, the biggest increase in the region. On the other hand, the HSCEI’s 10d realized vol saw the largest drop in the region, falling 5.1 vol points week-over-week to 9.2%.

• On average, term structures among Asian indices remained unchanged at 3.8% last week. The KOSPI 12M-1M term structure steepened the most, increasing 0.7 vol points to 2.9%. On the other hand, India’s NIFTY saw the largest flattening as its term structure flattened 0.5 vol point to 3.8%.

• Asian 3M 90-110% skews narrowed 0.2 vol points on average to 3.0%. Japan’s NKY narrowed the most, decreasing 1.0 vol point to 5.0%.

Bank of America Merrill Lynch
Global Equity Volatility Insights | 06 June 2017
19
HOUSE_OVERSIGHT_023593