Foreign capital flow into EMs climbs to $25 billion

Emerging markets (EMs) have witnessed an inflow of $25 billion from foreign portfolio investors in this month so far, says a report.

Equity flows were the dominant driver this month, with an estimated $14.6 billion in inflows, while debt flows were more moderate at $10.2 billion, according to the report by the Institute of International Finance.

Inflows were dominated by EM Asia, followed by Latin America, while EM Europe and Africa, West Asia saw modest outflows.

“Regionally, EM Asia saw total inflows of $19.1 billion, followed by Latin America with inflows of $8.7 billion, while there were modest outflows from EM Europe and AFME,” the report noted.

Portfolio flows to EMs rose to $24.8 billion in July from $13.3 billion in the preceding month. Prior to that, EMs saw an outflow of $12.3 billion in May.

“In fact, July marked only the second month over the past year where portfolio flows were above their long-term average of $22 billion,” it added.

The recovery in flows during the past few months follows a period of exceptional weakness in EM portfolio flows that began with China’s mini-devaluation almost a year ago and saw cumulative outflows of $81 billion from EMs, compared to $96 billion during the global financial crisis.