NEW YORK (Reuters) – The China versus rest of emerging markets divide in foreign portfolio flows continued in January as $8.8 billion net flows to the world’s second-largest economy contrasted with the $7.7 billion in outflows from the rest of EM.
Foreign net portfolio inflows to emerging markets in January were at $1.1 billion, the lowest since last March, data from the Institute of International Finance showed. The figure compares to inflows of $79.7 billion in January 2021 and $15.8 billion in December.
“We see investors pulling money from emerging markets’ bonds and equities at the fastest pace since March 2021, as anxiety builds over tighter monetary conditions, geopolitical frictions and fears that many economies will not recover quickly enough from the pandemic this year,” said Jonathan Fortun, IIF economist, in a report.
The IIF said last quarter that flows to ex-China EM had suffered a “sudden stop.”
Chinese debt took in $9 billion last month while equities saw their first month of net outflows since September 2020 at $0.2 billion.
The rest of emerging markets saw net outflows of $4.5 billion in debt, the most since March 2020, while the $3.2 billion outflow in equities was the largest since October 2021.
Regionally, Latin America saw a net inflow of $6.5 billion, all related to equities, coinciding with a massive outperformance from the region’s stocks compared with both EM peers and developed markets last month.
(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)