February 6, 2018 / 10:56 AM / a year ago

Emerging markets suffer $4 billion outflows, biggest since U.S. election, IIF says

A trader reacts as he watches screens on the floor of the New York Stock Exchange in New York, U.S., February 5, 2018. REUTERS/Brendan McDermid

LONDON (Reuters) - Investors have pulled nearly $4 billion out of emerging markets since Jan. 30, according to data from the Institute of International Finance (IIF) - the biggest slump since the 2016 U.S. presidential election.

The bulk of the outflows came from equities, which have lost $3.4 billion since flows turned negative on Jan. 30, the IIF said. South Korea, Indonesia and Thailand suffered the worst losses.

MSCI’s benchmark emerging markets index has fallen over 6 percent since the start of the month and was set for its worst daily fall since November 2016 on Tuesday, tumbling 3 percent.

Investors have scrambled for the exits after data on Friday’s showed the largest U.S. wage growth since 2009. That has fueled speculation the Federal Reserve will raise U.S. interest rates faster than had been expected, which would mean higher borrowing costs for emerging markets.

“While we remain generally optimistic on EM flows this year, downside risks should not be understated,” the IIF said. “A sustained global equity market sell-off would clearly be one such downside risk.”

Reporting by Claire Milhench, editing by Larry King

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