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Emerging markets see first weekly inflows since June: IIF

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Investors pumped an additional US$13.9 billion into emerging markets in October, marking the first monthly inflows since June on expectations the US Federal Reserve will likely delay increasing interest rates until next year.

[NEW YORK] Investors pumped an additional US$13.9 billion into emerging markets in October, marking the first monthly inflows since June on expectations the US Federal Reserve will likely delay increasing interest rates until next year.

Most of the inflows went to Asia, which received US$9 billion, according to data from the Institute of International Finance, a Washington, DC-based global trade group of financial institutions.

The sector's bonds had an additional US$7.7 billion worth of cash invested while equities had US$6.2 billion in inflows. The data includes assets bought by non US residents in emerging markets and is used as a barometer of foreign investor sentiment.

Much of the investment into emerging markets in October was driven by investor expectations that the U.S. central bank will not raise interest rates this year, rekindling some appetite for these riskier assets.

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"Looking at daily portfolio data, we saw a boost around the FOMC minutes, which further pushed the liftoff date for the interest rate hike into next year," said Scott Farnham, research analyst at IIC.

The Fed was believed to be close to raising interest rates in September but did not take any action. Minutes from that meeting, issued on Oct 8, explained the decision to hold off was taken to wait for further evidence that a global economic slowdown was not knocking the United State off course.

Asia, Latin America and Europe saw inflows of US$8.7 billion, US$4.1 billion and US$1.6 billion, respectively. Africa and the Middle East regions had a combined outflows of US$500 million.

Although emerging market stocks and bonds attracted investment in October, this was below the monthly average of US$22.4 billion seen between 2010 and 2014. "I have very little conviction in this trend so far," said Mr Farnham.

REUTERS

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