Investors pour into Chinese stocks, bonds lifting March EM capital flows: IIF

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LONDON: Investors ploughing into Chinese stocks and bonds lifted emerging market portfolio flows for a third straight month in March, data from the Institute of International Finance (IIF) showed on Thursday (Apr 6).
Overall, investors put US$9.4 billion into emerging markets, including US$6.8 billion into stocks and US$2.6 billion into debt securities.

The combined monthly figure, while positive, is the lowest of 2023, showing cooling enthusiasm for emerging market investments as central bank rate hikes worldwide aimed at tackling inflation increased funding costs for debt.

Flows into Chinese stocks more than doubled from February to US$7.2 billion, bringing total investment into Chinese equities this year to US$30 billion, with the removal of COVID-19 restrictions still boosting
markets.

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Money going into Chinese debt also rose, to US$3 billion, from US$800 million in February.

But emerging markets outside China saw outflows of US$500 million from equities and US$400 million from bonds.

“Markets have begun to take a more cautious approach to developing-market assets as an early-year rally fades and a soft landing for the global economy appears,” IIF economist Jonathan Fortun said in a statement.

“We see a crowding out effect from EM debt, with juicy yields available in more mature markets, the incentive is lower for investors to take on extra risk,” he added.

Source: Reuters

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