Emerging market portfolio flows have suffered a significant retrenchment since early May, according to the first issue of the IIF Flows Alert.
“EM outflows seem to have been triggered by the fallout from the global bond tantrum,” said Charles Collyns, chief economist at the IIF. “Even though the impact on EM spreads has been fairly limited so far, our data shows that the jump in global market interest rates has spilled over into portfolio outflows from emerging markets.”
IIF Flows Alerts are an early warning system that is based on daily portfolio flows to 7 EMs, including India, Indonesia, Korea, Thailand, South Africa, Brazil, and Hungary. Collectively, these countries suffered outflows of $3.2 billion in the first half of May. The reversal was broad-based, affecting all countries except Brazil.