Portfolio Investment Survey An International Co-ordinated Database

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Portfolio Investment SurveyPortfolio Investment SurveyAn International Co-ordinated Database An International Co-ordinated Database

Banco de España & IMF

Madrid 1 & 2 March 2006

Javier SantisoChief Development Economist & Deputy Director

OECD Development Centre

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11 CIPS: An essential tool for the futureCIPS: An essential tool for the future

CIPS+: A strategic tool for debt restructuringCIPS+: A strategic tool for debt restructuring22

CIPS+: A strategic tool for emerging marketsCIPS+: A strategic tool for emerging markets33

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CIPS: An essential tool …CIPS: An essential tool …

providing improved coverage by addressing asymmetric issues in reported balance of payments data …

… and especially in portfolio investment flows

undertaken on an annual basis since 2001 with 63 of the participating economies.

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… … that in 2000 would have been that in 2000 would have been very useful for monitoring very useful for monitoring

portfolio flowsportfolio flows

In 2000 no systematic databases of portfolio investments were available

One year spent with a research team of 3 economists to collect microeconomic data

300 interviews conducted with asset managers, buy- side and sell-side strategists Source: Palgrave, 2003.

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Emerging Market Equity Funds : Money Managers Ranked by Total Net Assets, July 2000

Assets Under Management Rank July 2000 Web siteCapital International 27,955 1 http://www.capgroup.com/Templeton Investment Management 9,115 2 http://www.franklintempleton.com/Schroder Investment Management 7,636 3 http://www.schroder.co.uk/Fidelity Investments 7,130 4 http://www100.fidelity.com/Morgan Stanley Dean Witter Invs MGT 5,176 5 http://www.msdw.com/institutional/investmentmanagement/Jardine Fleming Investment MGT 3,193 6 http://www.jffunds.com/Genesis Fund Managers 3,041 7 http://www.giml.uk.com/Morgan Grenfell Asset Management 3,027 8 http://www.deam-us.com/dam/Scudder Kemper Investments 2,776 9 http://www.scudder.com/t/index.jhtmlFleming Investment Management 2,750 10 http://www.flemingfunds.co.uk/Invesco Asset Management 2,537 11 http://www.invescofunds.com/UBS Asset Management 2,531 12 http://www.ubsbrinson.com/Credit Suisse Asset Management 2,521 13 http://www.csam.com/Baring Asset Management 2,438 14 http://www.baring-asset.com/flash.htmHSBC Asset Management 1,913 15 http://www.hkbc.com/english/ABN Amro Asset Management 1,839 16 http://www.abnamrofunds-usa.com/T. Rowe Price - Fleming International 1,655 17 http://www.troweprice.com/index.htmlMercury Asset Management 1,466 18 http://www.mam.com/uksite/index.htmSEI Investments 1,377 19 http://www.seic.com/Foreign & Colonial Emerging Markets 1,272 20 http://www.fandc.co.uk/Grantham, Mayo, van Otterloo 1,259 21 http://www.gmo.com/Frank Russell Investment Management 1,256 22 http://www.russell.com/us/home/Batterymarch Financial Management 1,225 23 http://www.batterymarch.com/Dresdner RCM Global Advisors 1,151 24 http://www.drcm.co.uk/Newport Pacific Management 1,146 25 http://www.lib.com/newport.htmlDeutsche Bank Investment Management 1,144 26 http://www.deam.co.uk/Impulsora del Fondo Mexico 1,105 27Vanguard Group 1,102 28 http://www.vanguard.com/Merryl Lynch Asset Management 1,058 29 http://www.merrilllynch.com/mutual_funds.htmJP Morgan Investment Management 973 30 http://www.jpmorgan.com/mutualfunds/Credit Lyonnais Asset Management 950 31 http://www.clamdirect.com/Advantage Advisers 931 32Aberdeen Asset Managers 926 33 http://www.aberdeen-asset.com/

The political economy of emerging The political economy of emerging markets: actors, institutions and markets: actors, institutions and

crisescrises

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crisescrisesGlobal Emerging Markets Funds : Fixed Income

Sample of Interviews, July 2000.Fund Name Assets (USD mios) Fund Manager Domicile

Emerging Markets Growth Fund * 22,638.65 Capital International USCapital International Emerging Markets * 4,310.35 Capital International USSchroder Emerging Markets Fund 2,781.77 Schroder Investment Management UKTempleton Developing Markets Trust * 2,733.49 Templeton Investment Management USTempleton IF Emerging Markets Series * 2,242.67 Templeton Investment Management USGenesis Emerging Markets Fund * 2,180.29 Genesis Investment Management UKMSWD Emerging Markets Portfolio A 1,417.58 Morgan Stanley Dean Witter Investments USSEI Emerging Markets Equity Fund * 1,378.88 SEI Investments USUBS Equity Fund Emerging Markets * 1,227.36 UBS Asset Management CHTempleton Emerging Markets Inv. Trust * 1,136.47 Templeton Investment Management USVanguard Emerging Markets Stock * 1,102.41 Vanguard Group USGMO Emerging Markets Fund * 1,101.66 Grantham, Mayo, van Otterloo USDeutsche GSF Emerging Markets Fund A 1,073.60 Deutsche Morgan Grenfell Asset MGT UKBatterymarch Global Emerging Markets * 1,063.31 Batterymarch Financial Management USEmerging Markets Trust * 931.49 Capital International USInvestlion Emergents 723.03 Credit Lyonnais Asset Management FranceBerstein Emerging Markets Fund 661.89 Sanford C. Bernstein USQuantum Emerging Market Fund * 660.04 Soros Fund Management USAAF Global Emerging Markets Equity * 610.72 ABN Amro Asset Management USMercury ST Emerging Markets Fund 549.42 Mercury Asset Management UKFranklin Templeton IF Emerging Markets * 505.67 Templeton Investment Management USBaring EMUF Global Emerging Markets * 459 Baring Asset Management USFrank Russell Investment EM Fund S 427.35 Frank Russell Investment Management USPictet targeted Fund Emerging Markets 421.62 Pictet Asset Management UKFidelity Institutional Emerging Markets * 418.28 Fidelity USMorgan Stanley Dean Witter EM Fund 407.07 Morgan Stanley Dean Witter Investments USSchroder Global Emerging Markets Fund 391.56 Schroder Investment Management UKSsga Emerging Markets Fund 378.59 State Street Global Advisors USSchroder Emerging Markets Fund 372.01 Schroder Investment Management UKFleming Emerging Markets Fund 359.6 Fleming Asset Management UKJPM Emerging Markets Equity Fund A 324.08 JP Morgan Investment Management USMercury Emerging Markets Fund 304.1 Mercury Asset Management UKFleming Emerging Markets Investment T 272.91 Fleming Asset Management UKF&C Emerging Markets Investment Trust 263.05 Foreign & Colonial Emerging Markets UKCS Equity Fund Emerging Markets Fund 261.4 Credit Suisse Asset Management USAxa Sun Life Emerging Markets Fund 255.22 Axa Sun Life Investment Management France

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100 Largest Emerging Markets Equity Funds, July 2000

Name Assets (USD mios) Ranking

Emerging Markets Growth Fund 22,638 1Capital International Emerging Markets Fund 4,310 2Schroder Emerging Markets Fund 2,781 3Templeton developing Markets Trust 2,733 4Templeton IF Emerging Markets Series 2,424 5Genesis Emerging Markets 2,180 6MSDW IF Emerging Markets Portfolio A 1,417 7SEI Emerging Markets Equity Fund 1,377 8UBS (Ch) Equity Fund Emerging Markets 1,227 9T Rowe Price New Asia Fund 1,205 10Templeton Emerging Markets Investment Trust 1,136 11Mexico Fund 1,105 12Vanguard Emerging Markets Stock Index Fund 1,102 13GMO Emerging Markets Fund III 1,101 14Deutsche GSF Global Emerging Markets Fund A 1,073 15Batterymarch Global Emerging Markets Fund 1,063 16Deutsche Profunds Pacific Fund A 1,007 17Korea Fund 1,002 18


crisescrises

Source: Javier Santiso, The political economy of emerging markets: actors, institutions and financial crises in Latin America, New York, Palgrave, 2003.

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Since 2000 new databases have been Since 2000 new databases have been developed with higher update developed with higher update

frequencyfrequency

Net capital flows into Emerging Markets

(USD billions)

-3.000

2.000

7.000

12.000

17.000

22.000

2002 2003 2004 2005 J an/2006

Source: BBVA, Capital Flows, EPFR

-100

-50

0

50

100

150

200

250

300

350

Jan-05 Mar-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06

200

225

250

275

300

325

Weekly EMD inflow s/outflow s (US$ mn, 4w k mv g

av g)EMBIG Performing sov ereign spread (bp) (RHS, inv erted scale)

Sources: EPFR, Bloomberg, and Santander Investment.

http://www.emergingportfolio.com/

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Back to the Argentine Debt Back to the Argentine Debt Default: CIPS+ as a strategic tool?Default: CIPS+ as a strategic tool?

0

40

80

120

160

ARGENTINA2005

ECUADOR2000

PAKISTAN1999

RUSSIA1998-2000

UKRAINE1998-2000

URUGUAY2003

Source: Porzecanski (2005)

0

2

4

6

8

10

J urisdictions Involved (rhs.)

Number of Bonds

Comparison of recent sovereign debt restructurings

The Argentine giant debt default has been epic in scale.

It involved 152 varieties of paper denominated in six currencies and governed by eight jurisdictions.

0

10

20

30

40

1999 2000 2001

Source: Nieto and Santiso (2006)

Argentina Brazil Mexico Venezuela

Latin American Countries: Number of Sovereign Bonds Issued before the Argentinean Crisis

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Back to the Argentine Debt Back to the Argentine Debt Default:Default:

CIPS+ as a strategic tool? CIPS+ as a strategic tool?

0

20

40

60

80

100

ARGENTINA2005

ECUADOR2000

PAKISTAN1999

RUSSIA1998-2000

UKRAINE1998-2000

URUGUAY2003


0

10

20

30

40

50

Months in Default (rhs.)

Scope of Sovereign Bond Restructurings($ Billions; lhs.)


0

20

40

60

80

100

120

ARGENTINA2005

ECUADOR2000

PAKISTAN1999

RUSSIA1998-2000

UKRAINE1998-2000

URUGUAY2003


Participation Rate (%)


Argentina defaulted on bonds worth $81 billion in December 2001.

It represented the longest period of debt restructuring : no database of Argentine bondholders is available (Lazard was hired for a year for this purpose).

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The Usual Suspects: Investment Banks’ Recommendations and

Emerging Markets

Argentina: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1

J ul-97 J ul-98 J ul-99 J ul-00 J ul-01 J ul-02 J ul-03 J ul-04 J ul-05

Source:The authors based on banks publications

AVERAGE

Total Average:-0.23Variance: 0.44Argentina: Bond flows and recommendations

-1

-0.5

0

0.5

1

jul-97 jul-98 jul-99 jul-00 jul-01 jul-02 jul-03 jul-04 jul-05

Source: The authors and IMF(CP IS)

0

15000

30000

45000

60000CPIS data (US$ mill.)

Recommendation (lhs)

-1

-0.5

0

0.5

1


Source: The authors and EP FR

0

2

4

6

8

EPFR data (% allocated)


Argentina: Bond flows and recommendations

Correlation: 0.83

-1

0

1

2

3

4

5

6

7


Source: The authors, IMF(CP IS) and EP FR

0

10000

20000

30000

40000




Argentina: Bond flows and recommendations Argentina: Equity flows and recommendations

-1

-0.5

0

0.5

1



0

5000

10000

15000

CPIS data (US$ mill.)


-1

-0.5

0

0.5

1



0

2

4

6



Argentina: Equity flows and recommendations

Correlation: 0.83

-1

0

1

2

3

4

5

6

7



020004000600080001000012000140001600018000CPIS data (US$ mill.)



Argentina: Equity flows and recommendations

Argentina (1997-2005):- 67% of underwriters’ recommendations were “neutral” or “overweight”.

- 100% of underwriters’ recommendations were the same or more favorable than the others’ recommendations (25% more favorable).

Source: Sebastián Nieto and Javier Santiso, “The Usual Suspects: Investment Banks Recommendations and Emerging Markets”, forthcoming, Working Paper, 2006.

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Brazil: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1



AVERAGE

Total Average:0.32Variance: 0.27

Brazil: Bond flows and recommendations

-1

-0.5

0

0.5

1



0

15000

30000

45000

60000

CPIS data (US$ mill.) Recommendation (lhs)

-1

-0.5

0

0.5

1



9

11

13

15

17

19

21EPFR data (% allocated) Recommendation (lhs)

Brazil: Bond flows and recommendations Correlation: 0.74

-1

4

9

14

19



0

10000

20000

30000

40000

50000

60000

CPIS data (US$ mill.)



Brazil: Bond flows and recommendations Brazil: Equity flows and recommendations

-1

-0.5

0

0.5

1



0

15000

30000

45000

60000


-1

-0.5

0

0.5

1



5

7

9

11

13

15

17

EPFR data (% allocated) Recommendation (lhs)

Brazil: Equity flows and recommendations Correlation: 0.45

-1

4

9

14



0

10000

20000

30000

40000

50000

60000CP IS data (US$ mill.)


EP FR data (% allocated)

Brazil: Equity flows and recommendations


Emerging Markets Brazil:

- 100% of underwriters’ recommendations were “neutral” or “overweight” (57% were “overweight”).- 70% of underwriters’ recommendations were the same or more favorable than the others’ recommendations (35% more favorable).


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Mexico: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1



AVERAGE


Mexico: Bond flows and recommendations

-1

-0.5

0

0.5

1



0

15000

30000

45000

60000


-1

-0.5

0

0.5

1



9

11

13

15


Mexico: Bond flows and recommendations

Correlation: 0.31-113

579111315



0

10000

20000

30000

40000

50000




Mexico: Bond flows and recommendations Mexico: Equity flows and recommendations

-1

-0.5

0

0.5

1



0

15000

30000

45000

60000


-1

-0.5

0

0.5

1



5

7

9

11

13

15


Mexico: Equity flows and recommendations

Correlation: 0.48

-113

579111315



0

10000

20000

30000

40000




Mexico: Equity flows and recommendations


Emerging Markets Mexico:

- 85% of underwriters’ recommendations were “neutral” or “overweight” (30% were “overweight”).- 70% of underwriters’ recommendations were the same or more favorable than the others’ recommendations (40% more favorable).


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Thank youThank youfor your attention!for your attention!

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Chile

Chile: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1



AVERAGE


Chile: Bond flows and recommendations

-1

-0.5

0

0.5

1



0

2000

4000

6000

8000

10000


-1

-0.5

0

0.5

1



0

0.25

0.5

0.75


Chile: Bond flows and recommendations Correlation: 0.34

-1

-0.5

0

0.5

1


Source: The authors, IMF(CPIS) and EPFR

0

2500

5000

7500

10000



Chile: Bond flows and recommendations Chile: Equity flows and recommendations

-1

-0.5

0

0.5

1



0

2000

4000

6000


-1

-0.5

0

0.5

1



0

1

2

3


Chile: Equity flows and recommendations Correlation: 0.54

-1-0.5

00.5

11.52

2.53

3.54



0

1000

2000

3000

4000

5000

6000



Chile: Equity flows and recommendations

Annex 1 The Usual Suspects: Investment Banks’ Recommendations and

Emerging Markets


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Colombia

Colombia: Bond flows and recommendations

-1

-0.5

0

0.5

1



0

2000

4000

6000

8000


-1

0

1

2

3

4

5



0

2000

4000

6000




Colombia: Bond flows and recommendationsColombia: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1



AVERAGE


-1

-0.5

0

0.5

1



1

2

3

4


Colombia: Bond flows and recommendations

Correlation: 0.73

Colombia: Equity flows and recommendations

-1

-0.5

0

0.5

1



0

300

600

900

1200


-1

-0.5

0

0.5

1



0

0.25

0.5

0.75



Correlation: -0.12

-1

-0.5

0

0.5

1



0

300

600

900

1200

CPIS data (US$ mill.) Recommendation (lhs) EPFR data (% allocated)



Emerging Markets


19

Venezuela

Venezuela: recommendations(1:overweight, 0:neutral, -1:underweight)

-1

-0.5

0

0.5

1



AVERAGE


Venezuela: Bond flows and recommendations

-1

-0.5

0

0.5

1



0

2000

4000

6000

8000

10000

12000


-1

-0.5

0

0.5

1



0

2.5

5

7.5


Venezuela: Bond flows and recommendations

Correlation=0.65

-1012345678



0

2000

4000

6000

8000

10000




Venezuela: Bond flows and recommendations Venezuela:Equity flows and recommendations

-1

-0.5

0

0.5

1



0

1000

2000

3000

4000


-1

-0.5

0

0.5

1



0

0.5

1

1.5EPFR data (% allocated) Recommendation (lhs)

Venezuela:Equity flows and recommendations

Correlation=0.1

-1

-0.5

0

0.5

1

1.5



0

1000

2000

3000

4000



Venezuela:Equity flows and recommendations


Emerging Markets


Documents

Portfolio Investment Survey An International Co-ordinated Database