Emerging markets attracted $3.4bn in February, only about a tenth of the portfolio flow the region raked at the start of the year as the spread of the coronavirus rattled markets, said the Institute of International Finance (IIF) in its latest monthly report.
EMs inflow stood at $29.5bn in January according to data from the Washington-based institute, which equated outflows seen in the period to the “trade-tantrum” episodes, when US-China trade tensions impacted equity dynamics.
“This is largely a result of the dramatic collapse of flows in the last one-and-a-half weeks when the increasing spread of the Coronavirus rattled global financial markets,” said IIF. “Effects are noticeable both on the debt and equities sides of non-resident portfolio flows.”
Equities outflows from EMs excluding China, which turned negative a month before worsened in February, making a dent in the emerging markets, especially in Asia.
Debt flows fell to $13.2bn, almost 60 percent lower than in January, which had seen the highest such flows since 2019 Q3.
On the equity side, the negative trend that we observed last month continued, with flows to China essentially coming to a halt and flows to the remaining EM universe reaching -$9.8bn (compared to -$6.8bn in January), said IIF.
According to the institute, a significant decrease in debt flows was broad-based with EM Asia experiencing the largest change—from $13.0bn in January to $5.1bn this month.
Equity flows turned from a $2.6bn inflow in January to a $4.5bn outflow with outflows growing slightly in EM Europe and MENA.
The coronavirus outbreak has been described by the OECD as the greatest danger to global since the financial crisis and is expected to cut growth from 2.9 percent to 1.5 percent if the crisis persists.
The IMF and the World Bank on Monday said they stood ready to support countries facing immediate financing needs arising from the virus crisis.
Similarly, the representatives of the world’s seven most industrialized countries (G7) met to decide on an effective response to the threat posed by the COVID-19 outbreak to the global economy.
While hopes of a deep production cut by OPEC and its allies have helped crude oil price bounce from its lowest level in a year.
The Nigerian Stock Exchange on Monday also saw a rebound gaining by the most since early January as investors bought cheaply in anticipation of policies that would gear up global growth and support market outlook.
