Emerging markets witness $25 bn foreign capital flow

The Dollar Business Bureau

In July so far, emerging markets has recorded a $25 billion inflow from foreign portfolio investors, with the funds are majorly driven by equity segment, a report said.

The equity flows contributed a major part in the month of July, with expected inflows of $14.6 billion, whereas the debt flows were more modest at $10.2 billion, said a report by the Institute of International Finance (IIF).

The emerging markets Asia and Latin America had dominated the inflows whereas emerging markets Europe, Africa and Middle East witnessed moderate outflows.

“Region-wise, emerging market Asia recorded overall inflows of $19.1 billion. This was followed by emerging market Latin America with $8.7 billion of inflows, whereas there were moderate outflows from emerging markets AFME and Europe,” the report mentioned.

Portfolio flows to emerging markets increased to $24.8 billion this month from $13.3 billion as compared to the month earlier. Before that, emerging markets witnessed a $12.3 billion outflow in May.

“In fact, the month of July marked just the second month in the entire past year in which portfolio flows were beyond their long-term median of $22 billion,” said the report.

During the last few months, the recovery in flows follows a span of extraordinary weakness in the emerging market portfolio flows that began with the mini-devaluation in China around a and witnessed the cumulative outflows of $81 billion from emerging markets, as compared to the $96 billion during the world’s financial crisis.