Portfolio flows to Emerging Markets (EMs) picked up in April 2021, reaching US$ 45.5 according to Institute of International Finance. US$ 14.2bn went to stocks (mostly to china – US$ 13.5bn), while the rest was invested in fixed income securities.The escalation of situation near the Ukraine border in the first half of April 2021 was followed by announcement of sanctions against Russia by Biden administration, blaming Russia’s foreign intelligence service for the SolarWinds hack. The sanctions banned US financial institutions from trading in newly issued Russian state securities, known as OFZs, and bonds issued by the Russian central bank and National Wealth Fund. Notably, this was anticipated by markets, with the share of non-residents in rouble-denominated OFZs, dropping to 5-year low of 20% in March. According to some analysts the new issue restrictions were likely the mildest action the White House could have taken. Going forward, the greatest threat to the Russian assets will be ban of trading in the active secondary market.
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