Emerging Market (EM) stocks and bonds attracted positive but relatively modest non-resident flows in March. After a strong performance in January and February, with inflows of $52.6bn and $31.2bn, respectively, the EM securities attracted an estimated $25.1 bn of foreign capital in March, according to Institute of International Finance (IIF).
The most profound dovish shift from the Fed since 2016 and more constructive trade talks between China and the US were positive catalysts. However, many EM currencies have fallen sharply this year, failing to benefit from the more constructive backdrop. IIF believes weak capital flows to EM reflect the positioning overhang we have been writing about recently.
March saw $17.6bn in debt inflows, after a similar reading of $18.2bn in February. The level of debt flows was mainly explained by inflows to EM Asia and Latam ($10bn and $3.9bn, respectively. For equity flows, IIF’s headline tracker for March ended at $8.1 bn. The reading for EM ex-China equity flows was $6.6 bn, while China flows were $1.6 bn.
“We estimate that our broader measure of net capital flows to EM, including banking and FDI flows, was $2.4bn in February. Revisions prompted by final 2018Q4 data for many countries, suggest January saw small outflows from EM rather than the net inflows we initially estimated. Driving February’s result were positive flows of $14.7bn to China, after witnessing outflows for 8 consecutive months,” IIF analysts said.
Source from: The Peninsula