Emerging Markets (EM) attracted only $2.1 billion offshore capital flow in August, 86.1 percent decrease from the $15.1 billion recorded in July with most regions recording outflows.
The August capital flows for EMs are the lowest in five months from the contraction seen in March.
According to the Institute of International Finance (IIF), data shows that the rebound inflows to EM is small compared to outflows earlier in the year.
“One reason may be growing differentiation in flows to EM, with some markets seeing outflows that continue to build,” IIF said.
Regionally, EM Asia was the most benefited region, registering inflows of $4.7 billion, followed by Latin America ($0.7 billion), with all the remaining regions posting outflows.
Equity and debt inflows for the period were $4.4 billion and -$2.3 billion respectively, according to the Institute of International Finance (IIF).
“Gyrations in the US-China trade narrative, a fresh bout of market turmoil in some EMs and lingering questions on the post COVID-19 recovery path marked the dynamics of non-resident flows during August”, said the Washington based institution.
“Negative sentiment on emerging markets approached extreme levels during March, setting the stage for a period of stabilization and more two-way discussions on risks and opportunities in the EM space”, said IIF.
Offshore capital flows in March were negative as equity and debt flows were -$52.4 billion and -$31 billion respectively.
This was greatly attributed to the impacts of the COVID-19 pandemic and series of lockdowns implemented by emerging markets to curb the negative impact which roiled the markets.
There was, however, a rebound in April as capital flows bounced to $17.1 billion, reversing the recorded outflow in the previous month.
The rebound however slowed in May to $4.1bn before a swift jump to $32.9 billion in June, and it hit $15.1 billion in July.
Debt flows posted their first outflow reading since the March shock, at -$2.3 billion while on the equity side, inflows to EM x/ China equities amounted to $3.8 billion, while flows to China posted marginal gains of $0.6 billion.
