Higher interest rates and inflationary pressures affected equity flows from emerging markets in October, while investment movements to China generally recovered, data from the Institute of International Finance (IIF) showed.
Emerging markets (EM) portfolios attracted $ 24.9 billion from foreign accounts in October, according to IIF data. The number compares with $ 31.8 billion last month and $ 61.8 billion in external flows in October last year.
Debt securities accounted for a net income of $ 20.1 billion from emerging markets last month, while equities received $ 4.8 billion, although there was a $ 2.5 billion outflow of shares outside of China.
It was the fourth monthly outing in the past six months for emerging market equities outside of China, bringing year-to-date withdrawals for emerging market equities outside of China to close to $ 16 billion.
“The focus for the coming months will be on how central banks deal with inflation fears and manage to anchor expectations,” wrote Jonathan Fortun, an economist at the IIF.
The EMs “have started to aggressively raise (interest rates), but we also notice a certain level of divergence on how the authorities plan to deal with inflationary fears. Overall, these concerns have hurt the outlook ”for emerging market equities outside of China, Fortun wrote.
Chinese equities raised $ 7.3 billion last month, while flows to Chinese debt recovered to $ 6.3 billion after the $ 6 billion exit in September.
China absorbed 55% of all flows to emerging markets, according to IIF data for October.
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