Emerging market outflows reach $33.8 billion in October
Lower US Treasury yields and a weaker dollar may provide relief following the US midterm elections, according to the Institute of International Finance.
Foreign investors withdrew a net $33.8 billion from emerging markets in October, marking the highest outflow since March, according to the Economic Times.
Equities were the primary driver of this movement, accounting for nearly all of the total with net outflows of $31.7 billion. This included nearly $32 billion leaving Taiwan, which the Institute of International Finance (IIF) noted as the largest monthly outflow in its data dating back to 2000.
Debt saw a net outflow of $2.1 billion. While $9.3 billion left Chinese debt, which was the largest outflow since May, $7.2 billion in inflows into bonds outside China helped offset the loss.
IIF senior economist Jonathan Fortun wrote that the October outflows occurred alongside lower US yields and a stable dollar. He suggested that country-specific shocks and appetite for equity risk were the primary pressures during the month.
In Asia, South Korea and Taiwan were among the largest decliners, with benchmark indexes falling 16.2% and 5.7% respectively. The IIF noted that investors appeared to be reducing large positions after significant gains earlier in the year.
Fortun stated there is potential for debt inflows into emerging markets excluding China to continue if the 10-year Treasury yield remains below its early October peak of 5.30%.
