Foreigners pull money out of EM portfolios after five months of inflows

By Thomson Reuters May 30, 2024 | 3:20 PM

NEW YORK (Reuters) – Foreigners pulled money out of their emerging market portfolios in April on concerns of a tighter monetary policy path in the U.S., with outflows from stocks in India and Indonesia leading the way, data from a banking trade group showed.

The Institute of International Finance data showed net non-resident portfolio flows for April came in at -$0.7 billion, the first monthly outflow since October.

The figure compares with net inflows of $30.2 billion in March and a $16.3 billion inflow in April 2023, the IIF data show.

Flows out of ex-China stock portfolios were the main culprit for the overall negative flow, with $3.8 billion leaving the regional asset class. Ex-China debt posted a $2.7 billion inflow.

Chinese stocks saw a $0.6 billion outflow while China debt posted April inflows of $0.9 billion, a seventh consecutive positive month.

“EM ex-China equity has seen outflows, mainly attributed to the more hawkish stand by the (U.S. Federal Reserve) and the prospects of looser monetary stance disappearing,” said via email IIF economist Jonathan Fortun.

“China equities have followed a same path and April saw small outflows in this category too. Having said that, we see China’s stocks gaining momentum, especially if stimulus policies meet market expectations.”

After having priced-in a rate cut from the Fed in the first half of the year for months, a 25 basis-point reduction in the benchmark rate is only priced in for September, data from the CME FedWatch tool show.

(Reporting by Rodrigo Campos; Editing by David Gregorio)