The new inclusion of India in JPMorgan’s GBI-EM could lead to a $3.2 billion of outflow in the Thai bond market that has experienced nearly THB60,000 million of non-resident outlaws so far this year.
JPMorgan analysts have projected that India’s upcoming entrance into JPMorgan’s GBI-EM, the globally renowned emerging market bond index, will draw an estimated total of $11 billion away from the local markets of South Africa, Poland, and Thailand.
The Wall Street multinational investment bank indicated that India’s inclusion, slated to commence this Friday and conclude over a ten-month period, is anticipated to redirect $4.7 billion from South Africa, $3.3 billion from Poland, and $3.2 billion from Thailand. Additionally, it is predicted to lead to outflows of $2.9 billion from the Czech Republic and $2.5 billion from Chile.
JPMorgan’s strategists, led by Michael Harrison, noted that the index inclusion of India is seen as a zero-sum game for investors dedicated to emerging markets, resulting in capital outflows from other EM local bond markets to accommodate this shift.
Since the announcement of India’s forthcoming inclusion in September, international investors have purchased over $10 billion in Indian government bonds, reaching a historic peak in ownership. Analysts suggest that roughly 32-40% of the projected $20-25 billion index-related inflows to India have already transpired.
Thailand closed the first quarter of 2024 with THB17 trillion in total outstanding bonds, with the energy sector comprising the largest share at 19.4%, followed by Finance at 11.7% and Property at 11%. By the end of March, foreign investors held THB900 billion worth of Thai bonds, equivalent to 5.3% of the outstanding total.
