(Bloomberg) – The flood of capital in emerging markets after the worst of the pandemic is weakening as risk appetite wanes, according to the Institute of International Finance (IFI).
While investors invested $ 31.2 billion in developing world stocks and bonds in February, it fell from a record $ 107.4 billion in November, according to IFI data. It’s a sign that rising U.S. Treasury yields are damping the euphoria over vaccine rollouts and rallies in commodity markets, according to the institute, an industry group representing financial companies around the world. .
“New fears of a reflation cycle in the US, combined with asset market turnover, has limited the scale of capital inflows to emerging markets and increased the risk of negative impact,” he wrote in a note. Jonathan Fortun, an economist at the IFI. “Rising rates in the US increase the risk of a tantrum-like episode.”
Non-resident purchases of emerging market assets are slowing.
In February, emerging market debt attracted $ 22.8 billion in net purchases from non-residents, according to the data. The shares only generated $ 8.4 billion, most of which went to China. It was the smallest entry into developing world equities since fund managers raised $ 5.3 billion in October, according to the IFI.
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