Funds likely to flow back to emerging markets

Blanque: ‘Stay calm. The world does not change overnight. Fears are overdone.’

Amundi CIO: Those with strongest fundamental will gain

KUALA LUMPUR: There is still ample liquidity in the market and funds will flow back to emerging economies though at a more discriminated basis, according to Pascal Blanque, global CIO of Amundi Asset Management, which manages over US$1 trillion in assets,

“There is a non-discriminative wave of risk diversion. Moving forward, there will be more discrimination across countries on a fundamental basis.

“There will be a point where we will see inflows back into the emerging economies benefiting the ones that are showing the strongest fundamental. This is clear,” the European CIO of the Year 2013 told StarBiz.

Blanque said there were also cyclical elements like the impact of the US Federal Reserve and current adjustments. He said the fear of a potential rate hike by the Fed was overdone.

He said what happened in China was part of the global move that is lacking of confidence towards emerging assets.

“What we are seeing at the moment and has started again before the Chinese event. It is a remarking on a non-discriminative country by country fundamental basis. In the first phase, we have seen markets focusing negatively on South Africa, Turkey and Brazil and this process is ongoing.”

“My point is that the move is not Malaysia specific. It is a global move within the emerging economies,” he said.

Blanque said part of the event was related to the fact that people suddenly realised that eventually the 7% growth rate was not sustaining.

“There’s is no bad guy in the game. What we can say was that there was an excessive focus on foreign exchange and currencies.

“The big focus should be on the internal demand, rebalancing of economy in China in this case. This is also the case in Malaysia and structural reforms. This is what we are seeing at the moment,” Blanque noted.

He said price adjustment was ongoing and markets were trying to adjust the risk premium on various assets like bonds, equities, external debt and local currency debt.

“This is an adjustment of risks premium. At the time when risks premium were generally tight across assets classes, note that no assets were overvalue but risks premium was tight. On the other hand, some currencies were not particularly cheap, some assets were tight. Some equities markets were neutral to slightly overvalue.

“With uncertainty coming, investors are looking for higher risks premiums,” Blanque opined.

Despite the volatile market condition, he said there were still plenty of liquidity in the market.

“Europe and Japan are pouring liquidity into the market. There is still ample of liquidity in the market searching for yield. We can’t say we’re facing bubble in all assets class.

“Stay calm. The world does not change overnight. Fears are overdone,” Blanque said.

He said Malaysia “score reasonably well” and its financial market was “deep”.

“There are real strength from fundamental stand point. The country is also committed to reform and has deep financial market,” he added.

Meanwhile. Amundi marked its entry into the distribution market in Malaysia with the launch of its two inaugural wholesale feeder funds – Amundi Bond Global Aggregate Fund and Amundi International Fund.

“Amundi Malaysia Sdn Bhd currently has over US$4bil of asset under management for our sovereign and institutional clients.

“We are now entering an exciting phase in our development and is looking to provide investment solutions that cater to the needs of the local investors,” Amundi Malaysia managing director Roslina Abdul Rahman said.

Amundi Malaysia will be rolling out two wholesale funds which will address the needs of sophisticated investors that could weather different investment cycles and time horizons.

In addition, it is expanding to include dedicated local sales and client servicing professionals who have access to Amundi’s global resources and marketing capabilities to support its distribution partners.

The two wholesale funds authorised to be sold to investors in Malaysia will be feeder funds to Amundi’s flagship funds, Amundi Funds Bond Global Aggregate and First Eagle Amundi International Fund, with over eight and 19 years outstanding track record respectively.

Amundi is the partner for 100 million retail investors worldwide whose US$275bil in assets are managed through banking networks, third-party distributors, private banks, platforms and fund selectors.