Four billion dollars in foreign flows exited emerging markets last June, registering outflows for the fourth month in a row. It is the longest exit streak since 2015.
The report of the Institute of International Finance (IIF) stated that cash outflows are burdening emerging markets with mounting concerns at the geopolitical level, tightening monetary policies and raising already high inflation rates.
The report stated that the continuation of volatility in the stock markets significantly damaged expectations.
The IIF said that markets are currently living in the shock of inflation rates and high global interest rates, noting that the long-term government bond yields rose sharply in advanced economies. It believed that data leads to more burdens on emerging economies.
The institute pointed out that the series of outflows at the present time is similar to what happened in a previous scenario during the years 2015-2016, and “in the coming months, several factors will affect the dynamics of these outflows, including the timing of the peak of inflation.. The expectations about the economy in China will also be in focus.”
The institute reported that despite the current readings, some major emerging markets are starting to rise compared to advanced economies, resulting in long-term real interest rates that are much higher than their peers in the G10, which may provide some protection from the global interest rate shock.
The IIF report coincides with reports of the exit of global funds from emerging markets in Asia, where “Bloomberg” reported, two days ago, that these funds sold shares worth $40 billion in seven regional markets during the past quarter, exceeding any period of time where a quarter was dominated by systemic pressures, since 2007.