Portfolio flows to emerging markets turned negative again in November after a month of inflows in October, according to estimates by the Institute of International Finance, a financial industry association.
The IIF said there were combined cross-border outflows from EM stocks and bonds by non-resident investors of $3.5bn in November, after inflows of $13bn in October.
November was the fourth month of the past five to see outflows, although the total for the year to date remains positive at $63.2bn, according to the IIF.
The prospect of rising interest rates in the US has weighed on portfolio flows in recent months.
The US Federal Reserve’s decision not, after all, to raise rates at its September meeting prompted an apparent relief rally in EM assets — although many EM policymakers had called on the Fed to get its long awaited rate rise over with and end the uncertainty.
The IIF said firmer expectations of a rate rise this month had prompted November’s outflows, along with “a broader upward shift in the expected path for Fed tightening”.
It said all regions except Latin America were likely to have seen outflows in November.
Despite a deepening and increasingly nasty recession in Brazil, many investors have continued to put money to work in Brazilian fixed income assets, which offer returns in line with the central bank’s target overnight interest rate of 14.25 per cent.
Brazil’s economy is expected to contract by more than 3 per cent this year. Nevertheless, the central bank is expected by some analysts to raise interest rates again at its meeting in January, after staying on hold since September, to battle inflation running at more than 10 percent a year.
Overall, debt flows have held up better than equity flows, which tend to be more volatile. On a 28-day moving average, equity flows turned negative at the end of October, while debt flows remained positive until mid-November.
The IIF said that final revisions to its figures for September confirmed that the third quarter of 2015 had seen the biggest quarterly outflows since 2008, at the height of the global financial crisis.
So far in 2015, it said inflows had averaged $5.7bn a month, well below the average of $22bn seen between 2010 and 2014.
The IIF estimates flows to 30 emerging markets based on historical data produced by national sources in all countries and daily or weekly data provided by central banks and exchanges in about half of them. Its estimates are broader than the widely-followed figures provided by EPFR, a flows tracker focused on mutual funds.
