[LONDON] Global investors pulled an estimated US$40 billion from emerging market assets in the third quarter, according to data from the Institute of International Finance, making it the worst quarter since the end of 2008.
An estimated US$19 billion was pulled out of equities and US$21 billion out of debt, the Washington-based finance industry body said in a report issued late on Tuesday. Dovish signals from the US Federal Reserve's September policy meeting provided only a short-lived boost to emerging market flows.
The Fed held off raising interest rates for the first time since 2006 citing concerns about slower global growth, China and market turbulence.
The decision generated a small relief rally in emerging markets but this reversed the following week and the main equity benchmark is now on course to end the quarter down almost 19 per cent. "Concerns about Fed lift off are ... likely to have added to recent market volatility, which seems to have weighed on EM portfolio flows," the IIF said.
The investor sell off represents the largest reversal since the fourth quarter of 2008, the height of the financial crisis, when emerging markets saw US$105 billion in outflows, the IIF said.
The quarterly figures include an unusually large revision to the IIF's July debt flow estimate, from inflows of $6 billion to outflows of US$12 billion.
The official data from countries like Korea, Turkey and Poland showed larger outflows than the IIF's tracking model had suggested. "Since flows to these countries may well have remained unusually weak amid the turbulence in August and September, we have also reduced our debt flows estimates for these two months," it said.