BNP Paribas Asset Management

In the five years from FY 2010 (the financial year ending in March 2010) to FY 2014, foreign portfolio investors (FPIs) purchased close to USD 90 billion in Indian equities, providing steady support to the market. Over the same period, domestic investors were net sellers of an estimated USD 7.4 billion in Indian equities (according to CSLA, September 2015), taking equities as a proportion of total Indian household assets down from 4% to only 2.2%.

Following the disappointing report on US non farm payrolls on 2 October, financial markets came in off the ledge in the first full week of October. Global equities, commodities and emerging market currencies posted their strongest week in several years.

How can we reduce the carbon footprint of portfolios? Over the last year, this issue has been gaining momentum in the international financial community, particularly through initiatives such as the Montréal Carbon Pledge, which BNP Paribas Investment Partners signed in May 2015.

On 29 September the Reserve Bank of India (RBI) cut its key policy repo rate by 50bp to 6.75%. While the rate cut was expected, its size – 50bp rather than the usual, more pedestrian 25bp – is surprising. In our view, the RBI took advantage of the favourable inflation outlook to ‘front-load’ a rate cut and help accelerate the Indian economic recovery in a context of slowing global growth.

Social investment is about investing in companies that have a positive social impact on people. It’s about socially-minded businesses that seek to strengthen people’s skills and capacities so as to help them participate fully in their working and social lives. The main areas they are involved in include education, services for dependent people, training, job-search assistance and rehabilitation.

The meeting on 16-17 September 2015 of the Fed’s monetary policy committee, the FOMC, had been awaited anxiously by markets. Ever since early 2014 the Fed has flagged the possibility of a rate hike by mid-2015, which would be the first hike in nine years and would come after almost seven years of zero official interest rates.

During August investors dusted off their research reports about China as well as text books on how a large economy makes the tough transition from investment/export-led to service/domestic demand-led growth. It would appear that Chinese authorities intend to move away from a managed currency peg to a more ‘market-based’ exchange rate, in line with the IMF’s guidance on SDR (special drawing rights) basket eligibility.

The last week of August 2015 started with a bloodbath in global equities as the carryover from ongoing Chinese negative economic news and stock declines caused near-panic selling around the globe, with the US Dow Jones down over a thousand points around the opening bell (about 6.6%). Good explanations for the sudden plunge in US equities were tenuous. The best one could say was “Something in China*”.

Global financial markets continue to digest the People’s Bank of China’s (PBOC) announcement on 11 August to devalue the Chinese yuan. The performance of various risk assets suggests considerable discomfort with the policy action. In the United States the week following the announcement was characterised by the largest equity outflows in 15 weeks (US dollar 8.3 billion), the seventh consecutive week of sovereign debt inflows, and the third straight week of money market inflows

Despite headlines on slowing growth in emerging markets, global emerging market small cap stocks have outperformed most major equity indices so far this year1. In our view, managing investments in this diverse asset class actively can offer investors numerous benefits.