Emerging market March inflows rise to 21-month highs - IIF

By Sujata Rao

LONDON (Reuters) - Foreigners are estimated to have pumped $36.8 billion into emerging market stocks and bonds in March, the highest monthly inflow in nearly two years, the Institute of International Finance said on Tuesday.

The Washington-based body, one of the most authoritative trackers of foreign capital flows to and from the developing world, said in a note that all four emerging market regions had received inflows, with Asia topping the list with $20.6 billion.

The inflow, the highest since June 2014, follows $5.4 billion received in February and is substantially above the 2010-2014 average of $22 billion, the IIF said. Bonds took in $18.9 billion and equities $17.9 billion, the data showed.

Latin America, which had been shunned by investors in recent months, took in $13.4 billion, the data showed, with equities in crisis-hit Brazil receiving over $2 billion "helped by attractive valuations and rising hopes for political change".

But the inflow surge may have ground to a halt, the group said, predicting that going could get tougher in coming weeks as expectations again grow for the U.S. Federal Reserve to raise interest rates a couple of times in 2016.

"In the absence of much improvement in the fundamental economic outlook for EMs, it appears that March's surge in flows to EMs was mainly due to a global risk-on shift in investor behaviour and lower mature market interest rates, supported by surprisingly dovish signals from the (Fed) on March 16," the note said.

The IIF also revised data for previous months, and now estimates that emerging bonds saw outflows of $8.8 billion in January rather than inflows of $4.3 billion. February debt inflows were revised upwards to $5.2 billion from $0.9 billion.

Equity flow numbers were changed for February to $0.2 billion inflow from a $1.1 billion outflow, while January outflows stand at $7.5 billion from the previous $6.9 billion.

(Reporting by Sujata Rao; Editing by Alison Williams)