Macro and Politics

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the July 24 – 31 period at 14:30 local time today. Based on our calculations using the CBT's analytical balance sheet, we estimate that the CBT's net FX reserves increased by USD2.7bn to USD53.7bn, while gross FX reserves rose by USD1.6bn to USD164.2bn, in the week of July 17–24. We expect today’s official reserve data to confirm a reserve build broadly consistent with our analytical balance sheet-based estimates. To recall the previous week’s data: Foreign buying activity remained muted in the equity market during the July 17 – 24 period, with net purchases totaling only USD38.9mn, while the bond market recorded a strong USD805.5mn net foreign inflow excluding repo transactions. Moreover, foreign investors' share of the total bond stock increased from 6.8% to 7% during the July 17 – 24 period, reaching its highest level since the week of March 6. During the same period, residents' FX deposits, excluding gold and adjusted for the EUR/USD parity effect, increased by USD2.2bn, while their total FX deposits, including gold and adjusted for valuation effects, increased by USD2.4bn during the July 17 – 24 period. According to the CBT’s official reserve data, gross FX reserves fell by USD8.0bn to USD149.2bn during the June 19 – 26 week, while net FX reserves declined by USD6.6bn to USD45.3bn. We believe the decline in reserves was largely driven by the correction in gold prices observed over the same period. As of June 26, gold accounts for 63.6% of the CBT’s gross FX reserves. Over the same period, the swap stock decreased by USD2.7bn to USD16.7bn, while net reserves excluding swaps deteriorated by USD3.9bn, falling to USD30.7bn.