Investors flee emerging markets in March in record numbers

Investors flee emerging markets in March in record numbers

Asset Management Bonds Debt Capital Markets Corporate & Sovereign Strategy Equity Fixed Income Funds Latin America Africa Asia Europe Middle East Coronavirus

A combination of the coronavirus pandemic and steep drop in global oil prices led to a record-breaking outflow of $83.3 billion from emerging market debt and equity funds last month, the Institute of International Finance (IIF) reported on Wednesday.

"This record-breaking outflow episode is significantly larger than the one seen during the global financial crisis and dwarfs stress events such as the China devaluation scare of 2015 and the taper tantrum in 2014," the IIF, a bank lobby group based in Washington, DC, said in its latest survey.

In the debt markets, outflows were an estimated $31 billion, the second largest monthly outflow on record and the largest since the 2008 financial crisis. 

On the equity side, the IIF split the asset class in two with one for China and another for everything else. Chinese equities had outflows of $12.3 billion while the rest of emerging market equities suffered a $40.1 billion outflow, the highest ever recorded by the IIF.

"All of this points to a sudden stop in EM due to the combination of uncertainty around the spread of COVID-19, and large oil price and financial shocks," the IIF said.

Debt markets in emerging Asia had the largest recorded outflows, turning from a positive inflow of $4.5 billion in February to a massive $19.5 billion in outflows in March. Equities in emerging Asia went from a net outflow of $5.5 billion in February to a $35.9 billion outflow last month.

"Unlike January and early February, where most of the outflows were contained to EM Asia, this time around the overall EM complex suffered record-breaking outflows," the report said.