Capital rises to EM in December, while China offsets the weakness elsewhere

NEW YORK (Reuters) – Net capital inflows into emerging markets rose last month from November and fell by more than 75% year-on-year, with China as the main recipient, with investors expecting other economies to remain underperforming, COVID-19 as a result. the survey was shown on Tuesday.

Non-resident flows reached $ 16.8 billion last month, compared to $ 13.7 billion in November and $ 70.2 billion in December 2020, according to data from the International Finance Institute.

China maintained positive debt inflows, taking in $ 10.1 billion in the last month, enough to surpass the net exit of $ 9.6 billion from emerging markets.

In terms of stocks, China accounted for 77% of net flows last month, for a total of $ 16.3 billion to $ 12.5 billion.

“Foreign investment in booming markets and bonds outside of China has come to a sudden halt for fears that many economies will recover quickly enough from the pandemic this year,” IIF economist Jonathan Fortun said in a statement.

“We expect the forecast to deteriorate for the Omicron (COVID) variant and the expectations of a stronger dollar and a higher US interest rate.”

Last month, the U.S. Federal Reserve accelerated a reduction in bond purchases and introduced more aggressive forecasts for a rate hike.

Chart: Going to emerging markets – https://graphics.reuters.com/GLOBAL-EMERGING/EMBARGOED/jnvweayalvw/chart.png

The first full-year IIF data showed that EM portfolios attracted $ 380.6 billion from non-residents last year, compared to $ 382.9 billion in 2020.

Net flows to China accounted for 55% of the total in 2021 and 65% in 2020, data show. In the fourth quarter of last year, however, China accounted for 108% of total net revenue of $ 52.8 billion compared to the remaining $ 3.8 billion in other EMs.

“We see a non-Chinese non-Chinese EM at a sudden halt,” Fortun wrote, confirming the trend for the last quarter.