Emerging markets saw 5th straight portfolio outflows in July, China recorded $6.4 bn outflow

 

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Emerging markets posted a fifth straight month of portfolio outflows in July, setting the longest such streak in records going back to 2005, amid global recession risk, inflation and a strong dollar, according to the Institute of International Finance (IIF).

Non-residents pulled $9.8 billion out of emerging market portfolios in July, the data show, increasing sharply from an outflow of $3.8 billion in June and compared to $35.1 billion inflow in July 2021, showed the data. Net outflow over the past five months totaled $39.3 billion, according to the IIF.

“Most of the recent dynamics in flows can be attributed to the dollar,” IIF said in a statement, noting that following a string of interest rate hikes the US Federal Reserve could be approaching a “neutral” rate. Reaching it and achieving some stability in U.S. interest rates could help stem the outflows.

China saw a net outflow of $6.4 billion, with $2.9 billion leaving debt portfolios and $3.5 billion exiting equities, according to the IIF. Ex-China emerging market saw inflows of $2.5 billion to equity portfolios, the first month of inflows since February, while ex-China emerging-market debt recorded $6 billion in outflows.