Brexit Uncertainties Unlikely to Cause Sharp Sell-Off in Cee Assets

Brexit Uncertainties Unlikely to Cause Sharp Sell-Off in Cee Assets

21 March 2016, 17:45
Roberto Jacobs
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Brexit Uncertainties Unlikely to Cause Sharp Sell-Off in Cee Assets

While Emerging Markets in 3Q15 recorded the strongest portfolio capital outflows since 2008, CEE managed to avoid heavy sell-offs. The total amount of portfolio capital inflows to CEE even increased in 3Q15, supported by strong inflows to the Czech Republic, which outweighed the outflows from other CEE markets.

In the case of Slovakia and Slovenia, outflows were just technical, where central banks had to buy substantial amounts of government bonds as part of the ECB’s Asset Purchase program. The only surprising outflow occurred in Poland in January, when the S&P decided to cut Poland’s rating and outlook as well.

Assets in the CEE region are vulnerable to Brexit uncertainties, which can (temporarily) weaken their safe-haven perception compared with EM peers. However, it does not seem that the CEE region will face any sharp sell-off. More dovish Fed statements and bold monetary easing announced by the ECB this month may reverse some flows back into CEE.

Preliminary Eurozone manufacturing sector PMIs scheduled to be released tomorrow will provide more clarity for the CEE. Data last month showed mixed results, PMIs were robust, while industry figures disappointed in a number of countries.

The material has been provided by InstaForex Company - www.instaforex.com

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