Markets spent 2018 debating if Turkey and Argentina are idiosyncratic, and the same debate is playing out now given the recent market sell-off. Our daily tracking of real money flows highlights broad-based weakness, where we see the EM positioning overhang as one underlying theme.

Portfolio inflows to Emerging Markets were $38 billion in April. Equity and debt inflows reached $14 billion and $24 billion, respectively. Net capital flows into EM rose to $27.7 billion in March.

The green loan market is still a niche but growing fast: gross issuance hit $60 billion in 2018—up by 30% from 2017    

Our activity tracker slowed markedly in 2018, but has been broadly stable since September. Tariffs played a limited role in the slowdown, but are finally taking a toll on tradable sectors. Credit-intensive sectors are turning around, suggesting China’s policy stimulus still works.

Frontier market debt rose by over $250 billion in 2018, reaching $3.2 trillion for the 26 countries in our sample. Zambia, Vietnam, and Tunisia saw the largest rise in debt ratios. 

The April 2019 IIF Global Regulatory Update provides updates on the Financial Stability Board along with current work streams in Regulatory Capital, Recovery and Resolution, Cyber Security, Digital Finance, Sustainable Finance, Systemic Risk, Insurance and upcoming events. 

EM assets have enjoyed tailwinds—more dovish Fed/ECB, better growth prospects, attractive valuations… but recent dollar strength and higher oil prices highlight risks ahead; Non-financial corporate EM FX debt up by over $2 trillion since 2009, pushing total EM FX debt to $5.3 trillion; High levels of dollarization reflect declining consumer confidence in Turkey and Argentina

We scan across EM for where – besides Turkey – growth is heavily credit dependent. Colombia, Russia, Indonesia, Brazil and Poland have growth heavily linked to credit.

The April edition of the Insurance Update provides targeted updates on IIF insurance activities and events, and highlights relevant IIF publications or related regulatory developments in other fields. 

Increasing international reserves provide a buffer, but inflows excluding official support are still weak. Amortization is lower in 2019 but still sizable and renewed domestic capital flight remains a risk.

Growth in 2019 will come from ongoing structural reforms to support non-oil activity, as the country has signaled that it will comply with the OPEC+ cuts. Medium-term prospects remain favorable. While the country has a new president, he is expected to remain committed to Nazarbayev's reform agenda. 

Elephant in the room: the U.S. accounts for fully a third of all global government debt; Fewer countries likely to see above-trend growth in 2020; Our new “green flows” tracker shows a sharp pickup for Q1; H1 2019 IIF Survey of Long-term Investors: fewer concerns about trade tensions, China slowdown

The Fed has undertaken a remarkable dovish shift so far this year, which some believe has further to run given this year’s review of policy. From a global perspective, this dovish Fed shift is potentially destabilizing. If the Fed succeeds in running the economy hot, longer-term yields will rise, a downside risk to our already more cautious EM capital flow projections.

The H1 2019 IIF Long-Term Investor Survey was conducted among the IIF institutional investor membership in March 2019.

South Africa’s current account deficit remains wide, and foreign investor positioning is the heaviest in EM. Reserves to deal with these vulnerabilities are limited. High private external assets provide some buffers, as repatriation offsets non-resident outflows partially. External vulnerability is high despite additional buffers.

Environmental, social and governance (ESG) considerations front and center for EM infrastructure