EM outflows eclipse financial crisis and taper tantrum levels

Sustained outflows from emerging market funds by international investors have lasted longer than both during the global financial crisis and the 2013 ‘taper tantrum’, research has shown.

The Institute of International Finance (IIF) said that the exit from emerging markets began on November 11 and has yet to come to an end. This means that this is now the longest continuous “reversal alert” since the IIF starting collating data back in 2005.

However, the body says that the amount of outflows has diminished significantly in recent weeks but the direction has remained “persistently negative”. Since October 4, investors have pulled $23 billion (€22 billion), which is greater than previous periods of volatility, such as in the financial crisis and the taper tantrum.

While the US election of Donald Trump has been a key driver of higher yields and a stronger dollar—both negatives for portfolio flows to emerging markets—so have idiosyncratic events in a variety of emerging markets.

From November 9 to December 16, the eight emerging market countries tracked by the IIF on a daily basis registered outflows of nearly $18 billion, of which $11.3 billion was accounted for by debt securities.

Half of these outflows were from Indian equities and bonds, which the IIF said were down to monetary reforms by the Indian prime minister, Narendra Modi.

©2016 funds europe

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