Investors funneled $44.8 billion into emerging market (EM) equities and debt portfolios in August, the largest inflow in almost a year, according to the Institute of International Finance (IIF).
- China remains the dominant driver, with over $39 billion net inflow into its debt and stocks.
- Ex-China equities faced a $7.4 billion outflow, highlighting shifting sentiment outside China.
- Regional inflows: Asia $18.1B, Latin America $8.9B, EM Europe $8.7B, Middle East & North Africa $5.8B.
Jonathan Fortun, senior economist at IIF, notes:
“Investor positioning appears increasingly sensitive to headline risk and policy noise, especially in economies exposed to external shocks or electoral cycles.”
On the positive side, cooler-than-expected U.S. inflation data strengthens expectations of Fed rate cuts, potentially channeling more capital into EMs with higher yields.
💡 Takeaway: While EMs remain attractive, investor caution is rising outside China, emphasizing the importance of selective positioning and risk management.