Net flows into emerging market assets were $17.1 billion (€16.2 billion) last month, meaning the region’s markets continued their comeback after a disappointing end to 2016.
The Institute of International Finance (IIF), a trade group of financial institutions, said that after substantial outflows in the fourth quarter of last year, the first two months of 2017 had seen $31 billion of inflows into emerging market assets.
Debt was the most attractive emerging market asset class last month, enjoying inflows of $10.9 billion, followed by equities with $6.2 billion of additional capital.
However, the IIF “remain cautious”. While emerging market valuations are attractive, there are potential headwinds for the regions, including a US-led shift towards protectionism. The body said that this may lead emerging market investors to be more selective this year.
China still provokes caution although outflows eased from $67 billion in December to $57 billion in January. The IIF said that stricter capital controls contributed to slowing down the outflows but a stronger dollar and higher interest rates could reverse that trend.
Flows into Brazil remain “robust” according to the IIF, with a more pronounced upswing in capital flows into Russia and Turkey this year.
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