The latest surveys on emerging capital flows showed in February a greater interest in bonds than by actions. The Chinese variant returned to the mat.
International investors revealed their greatest preferences for the fixed income of emerging markets over the Variable Income for the second consecutive month last February, and this is reflected in the capital flow tracker of the capital of the capital of the IIF that detected a net flow of 15.9 billion dollars. So that In the first bimester of the year, the net capital flows of non -residents to emerging market assets total about US $ 52,000 million. IIF economists characterize the panorama with which it started 2025 as of the boom of bonds, fall in shares, and China’s movements.
The probe corresponding to last February realizes that net flows to emerging markets left, on the one hand, a balance of U $ 2,100 million net exits in sharesbut highlighting the Strong tickets to the Variable Income of China for US $ 11,200 million, and on the other hand net tickets of US $ 18.1 billion in bonds. So that, following the future of recent months it is clear that In February, the divergence observed in the previous months between debt and actions markets continued. What was seen in the case of China, once again, shows that it reinforced its separation from the broader trend that registers the emerging variable income that extended its difficulties in February, reflecting the persistent caution of investors in a context of global uncertainty. “Although China registered notable tickets, the actions of emerging markets in general failed to capitalize on the strength of the developed markets, where the main indices recorded solid profits: The MSCI index of emerging markets rose only 2%, having a lower performance than the MSCI World index, which earned 4%”says Jonathan Fortun, IIF economist.
Regarding the positioning of the funds, it remained volatile, particularly in China, where the tickets were counteracted by institutional investors who reduced their exposure. “Some investors selectively increased their assignments to key sectors such as technology, but concerns about economic growth and political risks persisted”Fortun explains. Meanwhile, The outputs of Actions of India, South Korea and Taiwan accelerated, driven by commercial tensions, the weak profit expectations and the scrutiny of semiconductor exports.
Debt: the flows remained solid
On the other hand, The continuous strength of the dollaralthough lately it shows a certain weakening, he added more pressure on the coins of the emerging Asian markets, aggravating the challenges of the stock market. “However, says the IIF analyst, debt flows remained solids and investors maintained their preference for fixed income amid geopolitical uncertainties and monetary policy.” In this context, the local currency debt remained sued, supported by favorable performance differentials against advanced economies. In this regard, it is worth noting that Sovereign and corporate emissions registered a strong activity, particularly in Latin America and the Middle East. According to IIF data, Mexico and Saudi Arabia led the issuance of sovereign debtwhile Brazil and Chile saw a strong demand for corporate bondstaking advantage of the best market conditions. “The adjustment of base differentials between emerging market bonds and synthetic CDs (in general these are insurance against default) was an additional sign of confidence in the credit of emerging markets, and the risks of default are perceived as content,” says the IIF.
Attracts the Variable Income
About Strong tickets to the Variable IncomeFortun adds that, They are explained by the renewed optimism in the technological sector, particularly in artificial intelligence and semiconductors, which promoted the interest of investors despite the persistent concerns about macroeconomic stability. However, he clarifies, caution around regulatory risks and geopolitical uncertainty remained evident.
In other parts of the emerging fan, the dynamics of regional capital flows highlighted a marked differentiation: in addition to the case of India who experienced strong capital exits Due to concerns about gaining growth and extended assessments, South Korea and Taiwan faced a continuous capital escapewhich reflects the vulnerabilities of the supply chain and uncertainty about possible commercial restrictions. Meanwhile, Latin America remained a brilliant focus of debt tickets, benefiting from high rates of real interest and relatively stable political environments.
The future of emerging flows, sensitive to Fed
Looking ahead, says the IIF, Capital flows of emerging markets will remain very sensitive to American monetary policy and the broader macroeconomic evolution. The Federal Reserve Message (FED) has reinforced the expectations that interest rates will be maintained for longer, which reduces appetite due to the risk of emerging market assets. Besides, The strength of the dollar continues to weigh on the shares of emerging markets and exchange markets, particularly in Asia.
However, he points out, the demand for debt of emerging markets remains resistant and investors prefer local currency bonds of countries with stable policy frames. “While global uncertainty persists, the debt is likely to surpass the shares in the short term. While the debt markets of emerging markets maintain their appeal, the prospects for the shares remain clouded by the external risks and the macroeconomic winds against”Subjects Fortun.
To dimension what happened in February, it is worth remembering the numbers of last January where there was a net flow of US $ 35.4 billion to emerging markets, where debt flows increased AU $ S45,000 million (driven by 36.8 billion in emerging markets excluding China and 8.1 billion in China), while stock markets had difficulties and recorded outputs of US $ S9.6 billion (in China 2,000 entered 2,000 millions).
Source: Ambito
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