Capital flows continue to favour emerging markets

An estimated $25 billion inflows was seen in September alone, up from that seen in July and August


Regionally, EM Asia and Latin America had the most inflows during September, followed by EM Europe and Africa/Middle East. Photo: Bloomberg
Regionally, EM Asia and Latin America had the most inflows during September, followed by EM Europe and Africa/Middle East. Photo: Bloomberg

September quarter portfolio flows show that emerging markets (EMs) remain a preferred destination.

An estimated $25 billion inflows was seen in September alone, up from that seen in July and August.

In fact, inflows for the quarter at $64 billion were the highest since 2014, according to the Institute for International Finance (IIF), which tracks capital flows across 10 EMs.

However, within EMs, debt markets were the bigger beneficiaries compared to equity.

Regionally, EM Asia and Latin America had the most inflows during September, followed by EM Europe and Africa/Middle East.

Meanwhile, capital outflows from EMs have also been lower, although the bulk of this relates to China, which saw relatively greater stability.

China’s total outflows for the calendar year till date have been significantly lower than the corresponding year-ago period.

A region-wise analysis shows that the persistent hunt for yield in the face of low-to- negative rates across mature markets, a softer dollar and signs of better growth prospects in EMs have increased flows into these regions.

Increase in capital flows into Turkey, Poland and Indonesia has been discerningly better while that into Brazil and India have slowed sharply, according to IIF.

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