Emerging Market Investors Continue To Sell Assets
The exit from emerging market assets continued through the week as participants sold billions of dollars worth of stocks and commodities sensitive to higher US interest rates and worries over China’s perceived economic slowdown.
A net $4.5-B left emerging market equity funds in the week to 29 July, bringing the total outflow over the past three weeks to $15-B according to the data.
Gold and precious metals funds posted an outflow of $1.2-B, the largest weekly outflow since December 2013. Chinese equity funds posted a net outflow of $1.6-B, while Asian stock funds ex-Japan lost almost $3-B.
So far this year participants have pulled $26.6-B from emerging market equity funds. In that time, they have put a net $60.4-B into developed market equity funds, all of which has left the United States for Europe, Japan and other market destinations.
LME Copper prices hit a 6-year low this week, while Chinese stocks corrected 14.3% in July, their biggest monthly decline since August 2009.
The US Fed signaled an interest rate rise later this year but not in September. Also, the perception in the market is that the Fed will do whatever it takes to prop up the US stock market.
Brazil’s Real hit a 12-yr low and South Africa’s Rand a 13.5 yr low Vs the USD, forcing central banks in both countries to raise interest rates, which could have serious implications for growth. Brazil is already in recession and had its ratings outlook revised downwards by Standard & Poor’s earlier this week.
European stocks attracted $2.9-B of inflows, the 11th straight weekly inflow, and Japanese equity funds pulled in $1.8-B, their 21st inflow in the past 23 wks.
High yield bond funds posted a $1.4-B outflow, the largest redemption in 4 wks.
Have a terrific weekend.