Get Our FREE Newsletter

Sign Up

Capital flows to EM up in December, China offsets weakness elsewhere – IIF

Spread the love

Non-resident flows to emerging markets reached $16.8 billion last month, compared with $13.7 billion in November and $70.2 billion in December 2020, data from the Institute of International Finance showed.

China kept debt inflows positive, taking in $10.1 billion last month, just enough to edge the $9.6 billion net outflow from the rest of emerging markets.

In stocks, China took in 77% of the net flows last month, with $12.5 billion of the $16.3 billion total.

“Foreign investment in emerging market stocks and bonds outside China has come to an abrupt standstill over fears that many economies will not recover quickly enough from the pandemic this year,” said Jonathan Fortun, an IIF economist, in a statement.

“We believe that the outlook is worsened by the Omicron (COVID) variant and expectations of a stronger dollar and higher U.S. interest rates.”

Last month, the U.S. Federal Reserve accelerated its taper of bond purchases and unveiled more aggressive rate hike projections.

Graphic: Foreign portfolio flows into emerging markets- https://graphics.reuters.com/GLOBAL-EMERGING/EMBARGOED/jnvweayalvw/chart.png

Preliminary IIF data for the full year showed EM portfolios attracted $380.6 billion last year from non-residents, compared with $382.9 billion in 2020.

Net flows for China were 55% of the total in 2021 and 65% in 2020, the data show. For the fourth quarter of last year, however, China took in 108% of the net total inflows with $52.8 billion compared to a $3.8 billion outflow from the rest of EMs.

“We see non-China EM in a de facto sudden stop,” Fortun wrote, confirming the trend for the last quarter.

This post was originally published on this site