We were in Washington DC for the IMF Fall meetings and observed the investment ambiencetowards EM remains quite positive. Investors’ mood reflected not only expectations of robustand synchronized global growth but also that low inflation in DM is more a permanent ratherthan transitory phenomenon. Similarly, investors perceive improvements in the outlook for EMgrowth, well contained inflation, and an ongoing easing policy bias for EM. On risks, Fed policyhas been de-escalated as a risk and so too China as a macro risk. On the latter, Chineseauthorities recently emphasized at the 19th National Party Congress their commitment toeconomic growth, deepening supply-side reforms, and promoting the private sector, amongothers. Overall, we maintain a positive view on EM, for cyclical, structural and technicalreasons. We recognize that the strong performance across EM asset classes y-t-d make themprone to periods of profit-taking as we approach year-end, so we still propose buying on dips.    Investors’ preference for EM over DM continued for a ninth straight week in the week ended 18October, as a percentage of AUM. Among EM bond funds, most of the inflows went to Thailand,Mexico and Brazil in USD and to Frontier and Chile as a percentage of AUM. Within EM equityfunds, China, Brazil and India won the largest deposits in USD, whereas Uruguay, Mexico,Brazil and Peru grabbed the most inflows in AUM. Similar inflows to non-ETF and institutionalfunds supported EM bonds, while ETF and institutional funds kept equity funds afloat (p.13). InDM, US funds captured most of the bond inflows but HY registered outflows. Meanwhile, largeinflows to US and Global equity funds more than compensated for the heavy redemptions fromJapan funds.    HSBC’s early signalling system points to constructive demand for EM risk, particularly for EXDand equities (p. 14). Similarly, EM fund flows momentum (p. 5) and dispersion indicators (p. 8)point to some weakness in appetite for EM risk. Meanwhile, daily financial account portfolioflows show outflows from bonds (seven countries), as large outflows from South Korea cloudedinflows to India and South Africa, while equities posted inflows (eight countries), driven gains inSouth Korea, Brazil and South Africa (p. 15).

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