October 1, 2020
LONDON (Reuters) – Large outflows from emerging markets towards the end of September point to a big “risk-off” shift in emerging markets, Institute of International Finance economists say.
Emerging markets sucked in $2.1 billion in portfolio flows in a month marked by fresh market turmoil, uncertainty arising from the U.S. election, a rejuvenated dollar and uncertainty about the recovery from the coronavirus, the IIF said — more than the $700 million seen in August.
But it said high frequency outflows from emerging markets towards the end of the month were almost as big as in the 2013 taper tantrum or during 2015 when the Chinese yuan was devalued.
IIF said it saw growing differentiation in flows to emerging markets, with some markets seeing outflows that continue to build, and an increasing divergence between debt and equity flows.
During September, debt flows posted an inflow of $12.9 billion, while equities registered outflows of $10.8 billion, of which $4 billion left Chinese stocks.
Regionally, emerging Europe and Latin America saw inflows of $1.1 billion and $1.6 billion respectively, with all the remaining regions seeing inflows.
(Reporting by Tom Arnold; Editing by Catherine Evans)
