During February, foreign investor appetite recovered after outflows observed in the prior month. International investor inflows took place mostly in the MBono market and to a lesser extent in the Cetes market (USD2.18bn and USD317mn, respectively). In contrast, foreign investors decreased their positions in the Bondes and Udibonos market; however, in the net foreigners added exposure to government securities. Monetary policy uncertainty paused the positive trend observed from foreign investors at the end of last year. Nonetheless, as we approach the end of the current tightening cycle, appetite could continue to recover, despite short-term volatility.
Meanwhile, in tandem with foreign investor dynamics, local investors added inflows to government securities. Other local investors were the most active players as they added inflows of nearly USD8.3bn, mostly in the Cetes and MBonos markets. On the other hand, local pension and mutual funds inflows were focused on Udibonos and Bondes markets. Overall, local investors' share of all government securities is close to 84%, this year.
In terms of local equities, foreign investors continued reducing their positions, with a mild outflow of USD250mn observed in February. Volatility remains the name of the game in stock markets, due to uncertainty about how tighter monetary policies will affect the economic cycle. During March volatility is continuing so we do not expect much short-term appetite for equities.
Finally, in terms of global portfolio flows, IIF estimates suggest that flows to emerging market equity and debt portfolios continue on the right foot. The equity portfolio tracker shows that foreigners continued to add flows to EM. However, the recent volatility observed in the stock markets suggests that in March appetite will probably diminish. Meanwhile, the debt portfolio tracker shows that foreign inflows to EMs is also continuing. However, in the current risk aversion environment, during March, we expect a pause in the trend.