And What Have Foreign Investors Been Doing?
U.S. cross border flows
data for January, just released, reveal how foreign investors
perceive US assets and, conversely, how US investors feel about
investments abroad. Overall, US and foreign investors continued to shun US
equities in favor of foreign markets, for the first month of the year…
Net flows fell to a positive $34.7 billion from
$45.5 billion at the end of last year–their lowest since September 2002. This was
caused by to two factors: US investors purchasing foreign securities ($1.8
billion in bonds and $5.5billion in equities), and foreign investors selling US
equities (-$3.5billion). Meanwhile, net flows to US bonds increased to a positive
$45.6 billion, which includes $30.7billion in Treasuries, $4.7billion in
agencies, and $10.2billion in corporates.
Japan
Net inflows to the US from Japan increased to
$7.5 billion from $4.4 billion, due to increased Japanese buying of US
equities (+$.6billion from -$1.1billion) and a decrease in US buying of Japanese
equities (from $1.8billion to $.2billion). Japanese purchases of US bonds was
steady at $7.5 billion.
Europe
Net inflows to the US were almost flat on the
month at +$.5billion, down from +$6.3billion in December. This move was largely
caused by a decline in European purchases of Treasuries from $5.3billion in
December to $1.8billion in January. Meanwhile, US purchases of Euro equities
declined to $1.9billion from $4.1 billion, while Euro buying of US equities also
declined to $.8billion from $2.9billion.
US market behavior in March would suggest that
January’s–and probably February’s–cross border flow patterns were probably
interrupted, as real money accounts were behind the moves in the currency,
equity and fixed income markets.