1. Thank you a fantastic discussion today. I am thinking we have seen slow return of local market flows to EMs. Of course, credit (hard currency EM debt) has always accounted for larger EM allocations vs local currency. But could it also be EMs are "victims of their own success"? https://twitter.com/HyunSongShin/status/1326799937850499072
2. What has happened in the past? EMs would do pro-cyclical policies, hiking rates to protect FX. This would widen disproportionately interest rate differentials vs DM "sucking in" non-res flows as markets were starting to expect pass-through from FX to inflation to settle.
3. This time it is different, EMs cut into the shock (counter-cyclical polices) and tried "unconventional". Interest rate differentials in many cases were at preserved, but are smaller. Hence investor risk-reward is less obvious. Flows are more differentiated on other factors.
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