Daily Management Review

IIF: Capital inflows to emerging markets grows in 2019


The stock markets of developing countries in 2019 attracted $ 310 billion of portfolio investments of non-residents - against $ 194 billion a year earlier and $ 375 billion in 2017, experts at the Washington Institute of International Finance (IIF) calculated.

Particularly, the inflow amounted to $ 30.7 billion in December, compared to November’s $ 19.9 billion. Among the reasons for the increased demand for securities of emerging markets is the achievement of agreements between the United States and China, as well as consequences of the soft monetary policy of central banks of developed countries.

The inflow of funds into debt securities in December rose to $ 17.8 billion (from $ 15.9 billion in November). Investments in stocks in China rose to $ 10.1 billion. Inflow in shares in other emerging markets amounted up to $ 2.8 billion (this figure turned out to be positive for the first time since July 2019). The inflow of funds in bonds mainly increased for Latin America ($ 8.8 billion against $ 3.1 billion in November), in stocks - for the markets of developing countries in Asia ($ 13.6 billion against $ 7.3 billion).

According to IIF, the total capital inflow (including the banking sector and foreign direct investment) in November 2019 amounted to only $ 0.7 billion (data for December is not yet available), but was positive for the first time since August (in October, in particular, there was a decline in $ 49.6 billion). Note that in December the US Federal Reserve, maintaining the previous rate of 1.5-1.75% per annum, completed a short period of monetary easing (since July 2019, the rate has been reduced by a total of 0.75 percentage points). It follows from the protocol of the last meeting of the regulator that it will most likely maintain a rate even in case of improvement in growth and inflation indicators, which creates favorable conditions for investments in emerging markets.

source: iif.com