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Outside investors up emerging markets holdings to most since 2014
September 30, 2016 / 9:56 AM / a year ago

Outside investors up emerging markets holdings to most since 2014

NEW YORK (Reuters) - Overseas investors added to their holdings of emerging markets debt and equities this month, bringing investment in the asset class to its highest total since 2014, the Institute for International Finance (IIF) said Thursday.

September’s figures showed a continued recovery in capital flows to emerging markets after a weak start to the year, the IIF said, with non-resident portfolio flows rising to more than $25 billion in September for a total of $64 billion in the third quarter.

September’s numbers represent a sizeable uptick from about $20 billion per month in July and August and an increase to 12 percent of investors’ total portfolios, the highest level in more than a year.

“After a weak start to the year, there has been a marked recovery in capital flows to emerging markets,” IIF said in the statement. It attributed the revival to “the persistent hunt for yield in the face of low to negative rates across mature markets,” along with a softer U.S. dollar and “signs of improvement” in emerging market growth prospects.

It said yields on government debt in developed markets such as Japan and the euro zone remained at or below zero percent.

China, the world’s largest emerging market, continued to show net outflows with more than $36 billion leaving the country’s debt and equity market in August.

But China’s outflows have slowed, the report showed, as net capital outflows for all emerging markets declined to $200 billion for the period through August from $290 billion for the same period in 2015. The IIF estimated that China has seen $315 billion of total outflows year-to-date.

Excluding China, emerging markets saw net inflows of $119 billion through August, an increase of 20 percent from the same period in 2015.

Reporting by Dion Rabouin; Editing by David Gregorio

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