Tracking Global Demand for Emerging Market Sovereign Debt

IMF Working Papers, March 5, 2014

Source details

Proposes an approach to track US$1 trillion of emerging market government debt held by foreign investors in local and hard currency, based on an approach used for advanced economies (Arslanalp and Tsuda, 2012).
Estimates constructed on a quarterly basis from 2004 to mid-2013 and are available along with the paper in an online dataset.
Paper extends indicators from earlier work to assess sensitivity to external funding shocks and to track foreign investors’ exposures to different markets within a global benchmark portfolio.

Estimated universe tracked: US$1 trillion of emerging market government debt held by foreign investors.
Time coverage of estimates: quarterly from 2004 to mid-2013.
Net foreign flows into EM government debt during 2010–12: about half a trillion dollars.
Primary source of these flows during 2010–12: foreign asset managers.
Foreign central bank holdings have risen but remain concentrated in a few countries: Brazil, China, Indonesia, Poland, Malaysia, Mexico, and South Africa.
Foreign investor flows to emerging markets were less differentiated during 2010–12 against the background of near-zero interest rates in advanced economies.

Approach based on methodology previously used for advanced economies (Arslanalp and Tsuda, 2012).
Quarterly construction of estimates for 2004–mid-2013.
An online dataset accompanies the paper providing the underlying estimates and investor base data.

Extended indicators demonstrate how investor base data can be used to:
- Assess countries’ sensitivity to external funding shocks.
- Track foreign investors’ exposures to different markets within a global benchmark portfolio.