(Reuters) – Emerging market portfolios saw another month of foreign outflows in September, the first in the past eight months 7 months as non-residents pulled money from emerging-market stocks and away from China, data from the Institute of International Finance showed on Wednesday.
China bond market loses $1.4 billion in September, totaling 98 $200 million in withdrawals from the asset class in eight months as investors shy away from economic slowdown .
Factory activity there barely grew in September, with slower growth in services suggesting further cooling as the economy grapples with COVID- 19 containment and weaker global demand .
The Chinese equity portfolio fell by $700 million last month. Year-to-date outflows were $2.2 billion.
Emerging market equity portfolios outside of China also saw outflows, with $8.2 billion exiting the asset class last month, while debt outside China saw inflows of $7.5 billion
“With geopolitical events, realized inflation and uncertainty about policymakers’ ability to respond to the current situation, the increased risk of a global recession is weighing on emerging market flows,” Jonathan Fortun, Economist at IIF said in a report.
Overall, foreigners pulled $2.9 billion from emerging market portfolios last month, and year-to-date figures are 12 $700 million outflow.
Inflows to Latin America were $2.4 billion last month, and inflows to emerging markets in Europe were $300 million, according to IIF data by region. All other regions saw outflows.
Weakness in emerging market assets this year was expected as developed-country peers broke years of ultra-low interest rates in response to what has become in some cases Decades of high inflation. In more stable economies, higher returns draw money away from emerging markets.
Russia’s invasion of Ukraine in February triggered a spike in food and energy prices, further hurting many emerging market economies.