In relation to the monitoring of the IIF, the entity reports that what happened last March reflects the “market rotation”. In fact, something was already being warned when he published a report weeks ago, signed by Robin Brooks and Jonathan Fortun, “Global Macro Views: A Realignment in Global Capital Flows” where with the title they made it clear that there was a realignment in global capital flows . On that occasion, Brooks and Fortun pointed out that something very unusual was happening in global capital flows to emerging markets: China is seeing large outflows in our high-frequency daily outflow tracking, and these outflows began after Russia invaded Ukraine in late February. The exits from China in the scale and intensity that we are seeing are unprecedented, especially as we are not seeing similar exits from the rest of the emerging markets. It’s too early to say whether China’s exits represent a structural change, but the timing of the exits suggests Russia’s invasion of Ukraine may be playing a role, giving foreign investors pause and making them see China under a new light.
selective
Already with the new estimates from last March in hand, the monitoring of capital flows by the IIF affirms that foreign investment in stocks and bonds of emerging markets has suffered during the first quarter of the year. “We see investors becoming more risk-sensitive as anxiety about geopolitical events, tighter monetary conditions, rising inflation and fears that many economies will not recover quickly enough from the pandemic grow,” explains Fortun. who adds that, in general, the first quarter of the year has seen investors become more selective. Regarding the Chinese case, he recalls that the Asian giant has been a constant in the dynamics of capital flows in recent years, experiencing constant inflows as foreign investors increased their exposure, including through specific shocks to China. like the US tariffs and the early stages of covid. “However, last month our tracker shows a major outflow episode hitting China the hardest, this is an unprecedented dynamic that suggests market rotation,” Fortun explains. One reason capital flows to China have been so stable in recent years is that foreign investors had little exposure, in contrast to many other emerging markets. However, this month the IIF tracker shows outflows from both Chinese bonds ($11.2bn) and equities ($6.3bn). By contrast, emerging market debt outside of China attracted $8.2bn, and emerging market equities ex-China showed marginal outflows of $400m.
While it is premature to draw definitive conclusions, the timing of China’s exits suggests that foreign investors may be reassessing their exposure and a rotation in preferences could begin to take shape. “Going forward, we see more volatility in flow dynamics, as some countries have bottomed out and could potentially benefit from higher commodity prices, but may also be highly exposed to risk factors,” he adds. .
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
