According to Reuters, citing the Institute of International Finance (IIF) report on Tuesday, emerging markets (EM) suffered their first portfolio outflows in March as investors were ditching Chinese assets and were concerned about recent geopolitical events.
Jonathan Fortun, IIF Macroeconomist, tweeted on March 22, “Something very unusual is happening in capital flows to EM. China sees large (equity) outflows. Too early to say if outflows from China represent a structural change, but the timing suggests recent geopolitical events may be playing a role (similar dynamics during trade war).”
In February 2022, IIF data showed that the foreign net outflows for emerging markets were 13.3 billion. However, it went down to $9.8 billion in March. Bonds lost $3.1 billion while developing stocks dropped $6.7 billion.
According to IIF, the outflows of $11.2 billion in bonds and $6.3 billion in stocks from China were “unprecedented dynamic that suggests a market rotation” away from the country’s assets.
Jonathan added in the statement, “The timing of China outflows suggests foreign investors may be reevaluating their exposure, and a rotation in preferences could start to take form.”
The report from IIF, however, didn’t include specific figures for Russia.