Group 1 - Goldman Sachs' recent report indicates that during the week of August 18 to 22, emerging markets in Asia (excluding mainland China) experienced significant institutional investor sell-offs, with a net sell amount of $4.8 billion [1] - In contrast, the Chinese market saw a reversal with a net inflow of funds, demonstrating strong attractiveness [1] - Data from EPFR shows that as of the end of July, emerging market funds had the highest overweight in Indonesia and Thailand, while the largest increase in allocation was observed in mainland China and India [3] Group 2 - As of July 31, China's share in global actively managed public fund portfolios was 6.6%, which is below the 15% percentile of the past decade and underweight by 320 basis points compared to previous benchmarks [3] - Hedge funds accelerated their net buying of Chinese stocks as of August 20, with the buying speed reaching the fastest pace in the past seven weeks, driven by both long positions and short covering [3] - From August 14 to August 20, the inflow of funds into Chinese stock funds turned positive, with an inflow of $1.2 billion, reversing the outflows of $1.1 billion, $1.2 billion, and $0.7 billion in the preceding weeks [3] Group 3 - Compared to active funds, passive funds acted more swiftly, with five out of the top ten net inflow products among over 130 Asia-Pacific ETFs listed in the US being Chinese ETFs [4] - The iShares MSCI China ETF (MCHI) saw a net inflow of $226 million during the week ending August 21, while the KWEB ETF, tracking the CSI Overseas China Internet Index, had a net inflow of $183 million [4]

Group 1 - Goldman Sachs reported significant institutional investor sell-offs in emerging markets (excluding mainland China) with a net sell amount of $4.8 billion from August 18 to 22 [1] - In contrast, the Chinese market experienced a capital inflow, indicating strong attractiveness [1] - EPFR data showed that as of the end of July, emerging market funds were heavily overweight in Indonesia and Thailand, while China and India saw the largest increases in allocation [3] Group 2 - Global actively managed public funds increased their allocation to the Chinese market in July, with China's share in these funds at 6.6%, which is 320 basis points lower than the past decade's benchmark [3] - Hedge funds accelerated net buying of Chinese stocks as of August 20, with the fastest buying pace in the past seven weeks, driven by both long positions and short covering [3] - From August 14 to 20, Chinese stock funds saw a turnaround in capital flow, with an inflow of $1.2 billion, following previous outflows of $1.1 billion, $1.2 billion, and $0.7 billion in the prior weeks [3] Group 3 - Passive funds reacted more swiftly, with five out of the top ten net inflow ETFs in the Asia-Pacific market being Chinese ETFs [4] - The iShares MSCI China ETF (MCHI) saw a net inflow of $226 million for the week ending August 21, while the KWEB ETF tracking the CSI Overseas China Internet Index had a net inflow of $183 million [4]

Summary of Key Points from the Conference Call Industry Overview - The discussion primarily revolves around the Emerging Markets (EM) and Asia-Pacific (APAC) equity strategy, particularly in the context of US-China trade relations and currency fluctuations. Core Insights and Arguments 1. **US-China Tariff Dynamics** - The US-China tariff agreement indicates a reduction in peak tariff pain, with the weighted average tariff rate on US imports expected to decrease from 24% to 15% post-agreement, compared to 2.4% in 2024. This tariff shock is anticipated to negatively impact global trade and the economy [2][2][2]. 2. **Market Performance and Valuation** - MSCI EM has increased by 4.4% since April 1, while the 2025 consensus EPS has declined by 1.4%, suggesting that markets have reacted mildly to the tariff news. The EM price-to-earnings (PE) ratio stands at 18.2x, which is considered not cheap, with 2025-26 EPS growth forecasts of 15-17% facing downside risks [2][2][12]. 3. **Potential Capital Flows from the US to EM** - A hypothetical outflow of $1 trillion from the US into EM equities could result in $290 billion inflows for EMs. The absorption of this capital would take approximately 2.2 days in EM markets compared to 8.9 days in developed markets (DMs) [3][31][32]. 4. **Impact of USD Weakness on EM Equities** - A weaker USD generally has a negative impact on EM earnings per share (EPS), estimated at a 0.2-0.25% decline for every 1% depreciation. However, it tends to improve EM returns by about 3% for the same depreciation due to increased foreign equity inflows [4][4][38]. 5. **Regional Sensitivity to Currency Movements** - Taiwan, China, and India are expected to benefit the most from a weaker USD, while Japan is projected to benefit the least. Taiwan's foreign flows are particularly sensitive to currency fluctuations, often leading to market outperformance despite potential EPS hits [5][54][54]. 6. **Sector Sensitivity to USD Movements** - Real estate and transport sectors are likely to benefit the most from a weaker USD, while sectors like insurance, semiconductors, and pharmaceuticals may experience a more significant negative impact [42][42][42]. Additional Important Insights 1. **Market Ratings** - The report includes a market rating distribution for EM/AxJ, with China and Indonesia rated overweight, while Taiwan and Saudi Arabia are rated underweight [7][7][7]. 2. **EPS Revisions** - Recent revisions indicate a downward trend in EPS for 2025 across various markets, with significant impacts noted in Japan, the USA, and Hong Kong [19][20][21]. 3. **Foreign Flows and Currency Performance** - The sensitivity of foreign flows to currency movements varies significantly across countries, with Taiwan showing the highest sensitivity and Japan the lowest [54][54][54]. 4. **Investment Recommendations** - The report suggests a rotation out of 'defensive and domestic' themes in favor of markets like Korea, Mexico, and Hong Kong, while India's attractiveness may diminish [2][2][2]. 5. **Long-term Outlook** - The long-term outlook for EM remains cautious, with potential risks from global economic conditions and tariff policies impacting growth forecasts [2][2][2]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and outlook of the EM and APAC equity markets.

Summary of Emerging Markets Equity Strategy Conference Call Industry Overview - The conference call focuses on the Emerging Markets (EM) equity landscape, highlighting recent trends in fund flows and investment patterns across various regions, particularly India and China. Key Points and Arguments Fund Flows - EM equities experienced outflows of **-$554 million** after previous inflows of **+$379 million** the week prior [1] - Year-to-date (YTD) EM equity flows are at **-$7.1 billion** [1] - Emerging Market (EM) equity funds saw a total of **+$586 million** in ETF subscriptions, contributing to a total of **+$11.2 billion** since January 29 [1] - Non-ETF funds faced outflows of **-$1.1 billion** [1] Regional Insights - **India** reported significant inflows of **+$2.7 billion**, breaking a streak of 14 weeks of outflows [2] - **China** saw inflows of **+$1.2 billion** after three months of sell-offs [2] - Other notable inflows included **Mexico (+$184 million)**, **Poland (+$122 million)**, and **Chile (+$50 million)** [2] - **Korea** had inflows of **+$1.2 billion**, while **Taiwan** recorded marginal inflows of **+$84 million** after four weeks of heavy sell-offs [2] - In contrast, **Brazil** experienced outflows of **-$197 million** after two weeks of inflows [2] - **South Africa** and **Turkey** faced significant outflows of **-$303 million** and **-$444 million**, respectively [2] Performance Metrics - The overall EM equity performance remains under pressure, with a notable decline in flows compared to previous periods [4] - Developed Europe saw strong inflows of **+$3.1 billion**, contrasting with the outflows in the US, which totaled **-$20.3 billion** [4] Market Dynamics - The report indicates a mixed sentiment across different EMs, with some regions showing resilience while others continue to struggle with outflows [2][4] - The data suggests a potential shift in investor sentiment towards India and China, which may present new opportunities for investment [2] Additional Insights - The report emphasizes the importance of monitoring regional fund flows as a key indicator of market health and investor confidence [4] - The analysis includes a detailed breakdown of fund flows by region, highlighting the disparities in investment behavior across different markets [4] Important but Overlooked Content - The report notes that all EM ASEAN countries experienced outflows, indicating a broader regional challenge [2] - The data also highlights the ongoing volatility in the EM space, suggesting that investors should remain cautious and vigilant [4] This summary encapsulates the key insights from the conference call, providing a comprehensive overview of the current state of the Emerging Markets equity landscape and the implications for future investment strategies.