Real money flows into EM stocks and bonds have surged recently, perhaps in anticipation of a benign outcome to China-US trade talks. Our daily tracking estimates flows into non-China EM at $23 bn in Q2. Our measure of China’s “core” current account surplus remains healthy, but additional US tariffs could tip the balance and cause RMB to fall.

Last year we unveiled a new measure of genuine FDI flows to EM which strips out reinvested earnings to focus only on “true” FDI flows. This measure of “true” flows has fallen to its lowest level in 20 years, a global FDI shortage that impacts emerging as well as frontier markets.

The Fed is likely to reignite a wall of money to emerging markets, and our high frequency tracking of flows already shows a sharp spike. As the hunt for yield restarts, positioning in EM is a central question. South Africa is most over-, Brazil and Russia most under-positioned.

Our high frequency trackers show a substantial pick-up in flows, though the underlying picture is weaker than headline numbers suggest. The rebound is concentrated in China, with Mexico and Indonesia also up, while the flow picture to India, South Africa, Turkey and Thailand is weak, even after large outflows during the emerging markets sell-off last year.

Our trackers do not point to a convincing pick-up in flows beyond China, with flows to key emerging markets like India and South Africa quite weak, even after sizeable and persistent outflows during last year’s EM sell-off.