* Emerging market debt trading rises year-over-year in 2016
* Trading lower in Q4 than Q3 last year
* Mexico, Brazil, India had most traded instruments (Adds data, analyst quote)
By Dion Rabouin
NEW YORK, March 29 (Reuters) - Trading volume for emerging market debt rose 9 percent last year to $5.167 trillion, according to a survey of 45 leading investment and commercial banks in 90 emerging market countries.
The survey from EMTA, the emerging markets debt trading and investment industry trade association, found that debt trading volume fell in the fourth quarter of 2016 to $1.132 trillion.
That number was down 18 percent from trading during the third quarter of 2016 and 2 percent lower than trading in the fourth quarter of 2015.
EMTA said that emerging markets debt trading volume in 2015 was the lowest recorded since 2009.
The growth in 2016 was the result of “strong inflows, volatility related to global political events (Brexit, U.S. elections), and idiosyncratic market developments within emerging markets,” Hongtao Jiang, head of emerging market credit strategy at Deutsche Bank, said in a statement accompanying the release.
He also noted that India and Argentina were the largest contributors to idiosyncratic country risk.
“However, this masks a multiyear declining trend in trading volumes as 2016 total turnover remains substantially lower than 2013 and 2014 levels,” he said, “reflecting the impact of tighter regulation across banks on their ability in providing liquidity.”
Local bond trading declined in 2016, with turnover in local markets instruments falling 10 percent to $664 billion in the fourth quarter from $740 billion in the fourth quarter of 2015. Local bond trading also decreased from the third quarter when volumes were 24 percent higher at $878 billion.
Local bonds made up 59 percent of total reported volume. Mexican instruments were the most frequently traded, followed by Brazil and India.
Mexico, Brazil and India also had the most traded instruments overall in emerging markets due to the substantial political upheavals facing each country during the year, analysts said.
“That level of volume, especially in Latin America, would be explained primarily based on the political moving pieces last year,” said Juan Perez, currency strategist at Tempus Inc in Washington.
Perez pointed to the scandal that ultimately led to the impeachment of Brazilian President Dilma Rousseff, Indian Prime Minister Narendra Modi’s surprise ban on high-value currency notes and the U.S. presidential election during which the Mexican peso became tied to Donald Trump’s election chances.
Securities from China and Poland were also heavily traded. (Reporting by Dion Rabouin; Editing by Grant McCool and Jonathan Oatis)