Portfolio flows to emerging markets climb to a 21-month high at US$36,8 billion evenly split between bonds and equities, seven times February's volumes, celebrating the return of risk appetite and heartfelt thanks to the Yellen. After a month of January which had marked the umpteenth hemorrhage from emerging stocks and bonds, the hunt by global investors for the yields of emerging countries explodes in March as has not been seen for a couple of years now, with Asia attracting almost 21 billion dollars followed by Latin America with 13,4 billion, only two in Brazil. In fact the month of February had seen 95% flows all on riskier bonds only, leaving interest on equities close to zero.
All this after the geopolitical variable has regained the center of attention of the investment strategies by item of the International Monetary Fund itself which in the 2016 Outlook underlines how geopolitical risks are a real risk for investors, together with the performance of commodities, especially of oil, the resurgence of nationalisms and the monetary conditions of the main international financial markets grappling with the risk of deflation.
But let's try to knot the strings of a complex plot that starts from the USA and from a new awareness of the affirmation of Trump's candidacy who has routed his opponents since March and is preparing to sprint against Clinton or Sanders and with Mike Bloomberg who remains in the rear. The market has begun to think about the possible effects deriving from the isolationist policies of "Trump-olini": first of all, the Transatlantic agreement with the Asian continent, the TPP, which was to be the strategic pivot of the new American commercial policy towards the Asian countries. Without implementation of the TPP we would witness the dematerialization of the "third arrow" of Japanese Abenomics policies, that of structural reforms, and then the commitment to make Americans buy only cars manufactured in the USA certainly doesn't help.
The misinterpretation of NAFTA that Trump and Sanders have in common in failing to see that without the US free trade agreement with Canada and Mexico the US automotive industry would be on its knees is typical of electoral "performance anxiety". And China laughs it off, waiting to further strengthen, with the help of the introduction of the renminbi into the IMF basket in October, its leading role for the Asian continent at the expense of Japan victim of worsening economic data.
The impact on the WTO would then be devastating and it would be only the beginning given the billionaire's program of "hostility" also towards NAFTA and therefore the pressure on Mexico also for greater border security. To close the candidate's indigestible menu, his commitment to wanting to make NATO allies like Japan and South Korea pay the costs of US troops would create an incurable rift in the Organization itself, with all due respect to Vladimir Putin who is not for nothing a reciprocated admirer of Trump.
Betting at the box office still gives Clinton the lead but this month of March marked a turning point in the US political scene which however does not seem to have touched or created particular anxieties in the OPEC countries, where the Saudi Oil Minister Al Naimi candidly admits that Saudi Arabia is against production cuts and Venezuelan Minister Del Pino has returned to his "homeland in default" after a Middle Eastern road show with a meager haul. April 17 in Doha will open with the Russian-Saudi pact on the freezing of production levels and in the aftermath of the surprise move of Putin's withdrawal from Syria which has left room for Assad's troops to reconquer Palmyra.
A lightning move ahead of the Duma elections in September allowed the quintessential judoka to flex its muscles by consolidating a 25% loss of territory to ISIS, to revamp its image with a population exhausted by sanctions, and to divert attention from the deadlock of the Minsk II peace accords. All while not wasting too much of a precious budget in times of recession! Crimea, like Syria, have been defensive wars for Putin to keep the EU and NATO away from the Russian borders and to create confusion in the alliances by reaffirming the centrality, willy-nilly, of Assad's role in an anti-IS version in a Syrian conflict born and wanted for an oil risk with too many interests in the field and to the detriment of an entire population and with the utmost satisfaction of the Turks who will see their current account deficit financed between now and 2018 thanks to EU aid.
Yes, because the issue of migratory flows from Syria is creating new frictions between Germany and Greece, the latter at the mercy of the effective implementation of the EU-Turkey plan and with the clear risk that the flows will only move towards the Albanian and Bulgarian border . If this is the picture, we shouldn't be surprised by the race for emerging markets, and if we then want to look at Obama's latest madness who wants to transfer the Thaad anti-missile system to South Korean territory in response to the North Korean "threat", making the Chinese extremely nervous. it seems necessary to delete the photo of smiling faces from the last meeting in California with Asian leaders which was supposed to promote the TPP in Asia pending ratification in November, therefore after the elections, and focus on new geopolitical balances.
The Asian Development Bank's multilateral meeting closed yesterday with a forecast for Asia's growth of 5,7% for 2016 and 2017 led by India at 7,4% and China at 6,5% ; in hindsight more than three times the aggregate growth of the USA, EU and Japan expected at 1,8% for this year. Important numbers for investors increasingly aware of the need to rebuild positions on Asia and not to underestimate the persistence of a political framework in which Yellen has shifted attention to the next rate hike in June, favoring the recovery of emerging markets for at least others three months and maintaining a competitive dollar to absorb some of the damage from the oil drop on the shale oil industry.
