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China mends sentiment this morning; EPFR data indicates inflow into Russia


Global equities entered consolidation mode after the FOMC left its monetary policy stance intact, which happened just a few days after the ECB took a bold step towards a more accommodative interest rate environment. The fact that several committee members expressed the view that more stimulus would be necessary leaves the door open for more stimulus in 2H12. However, the tactical aspect of the timing of the QE-style move is key, and seems to be delayed. The US macro data has remained weak for quarters and the lack of improvement in this negative trend could eventually raise more pronounced questions about the necessity of additional support from regulators. This could take centre stage ahead of the US presidential campaign and the remaining risks attached to the US «fiscal cliff».

Meanwhile, today’s macro data from China, where 7.6% GDP growth for 2Q12 came just in line with expectations, confirmed the ‘soft landing’ pattern which has been aired for several consecutive quarters. And while the figure was broadly expected by the market, it suggests that the state would have to enlarge the scale of the stimulus to curb the negative trend. And the market reaction this morning once again confirms the maxim ‘the worse, the better’: expectations of more pro-growth monetary actions have spurred a bounce in Asian equities this morning.

This morning, EPFR reports that the Russian equities posted inflows of USD 75mn (0.15% of AuM) over the week ending 11 July. On a four-week average horizon flows were flat. Russia-dedicateds posted USD 51mn (0.41% of AuM) of inflows. GEM funds attracted USD 29mn (0.14% of AuM) into Russia. Overall, EM funds received USD 697mn (0.11% of AuM) of inflows. On the global calendar, today, the focus will be on US June producer prices and UoM July consumer sentiment.

Alexey Zabotkin, Sergey Galkin, Ilya Piterskiy, Anastasia Markina
VTB Capital analyst

China, GDP

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