Macro and Politics

* Foreign investors recorded net sales of USD137.6mn in equities and USD130.1mn in the bond market (excluding repo transactions) in the week of March 13–19. Accordingly, foreign outflows from the bond market extended into a fifth consecutive week, bringing the cumulative outflow over this period (ex-repo) to USD5.9bn. Meanwhile, the foreign share in the total government bond stock edged down to 6.7% from 6.9%. That said, the pace of foreign outflows in both equity and bond markets appears to have moderated in recent weeks. Following the onset of the US – Iran conflict in the week of February 27 – March 6, foreign investors had recorded net sales of USD755.6mn in equities and USD1.7bn in bonds. This was followed by outflows of USD321.8mn in equities and USD2.9bn in bonds in the week of March 6 – 13. Today’s latest data, pointing to total weekly outflows easing to around USD130mn, suggest a gradual deceleration in foreign selling pressure. Moreover, the residents’ FX deposits increased by USD668mn in the week of March 13–19 (excluding gold, EUR/USD parity effect adjusted). A breakdown of the data indicates that the increase was primarily driven by corporates, whose FX deposits rose by USD642mn, while household FX demand remained subdued, with a limited increase of USD26mn. Over the same period, residents’ gold deposits posted an increase of USD172mn, driven by a USD288mn rise in household holdings, partly offset by a USD117mn decline in corporate accounts. In sum, residents’ total FX deposits (including gold, price adjusted) increased by USD840mn during the week. Lastly, the CBT reserves continued to decline in the week of March 13–19. Accordingly, gross FX reserves fell by USD12.2bn to USD177.6bn, while net FX reserves declined by USD11.6bn to USD57.3bn. The gold component of gross reserves dropped sharply from USD134.1bn to USD116.2bn. Over the same period, the swap stock edged down by USD258mn to USD14.4bn, while net reserves excluding swaps declined by USD11.3bn to USD42.9bn.