Significant Outflows in Emerging Market Funds

According to J.P. Morgan’s weekly report, emerging market (EM) funds experienced substantial outflows last week, continuing a challenging December for these investments.

Fund Outflows

• Bond Funds: Recorded $1.5 billion in outflows.
• Equity Funds: Saw even larger withdrawals of $4.6 billion.

Breakdown of Outflows:

• Bond Outflows:

  • Hard currency funds: $1 billion (up from $508 million the previous week).
  • Local currency funds: $480 million (down from $496 million).

• Equity Outflows:

  • Exchange-traded funds (ETFs): $3.1 billion (compared to $262 million a week earlier).
  • Non-ETF equity funds: $1.5 billion.

Year-to-Date Totals

• EM bond funds: $28.2 billion in outflows.
• EM equity funds: $30.3 billion in losses.

This year has demonstrated volatility as investors weigh risk against global macroeconomic challenges like interest rate hikes and geopolitical uncertainty.

Some Bright Spots

Despite the overall trend, there were positive foreign portfolio flows into EM local bonds, particularly in Indonesia with $584 million in net inflows. Conversely, foreign equity investments faced challenges, with Korea reporting the largest outflows at $847 million.

Conclusion

The data indicates increased caution among global investors, driven by inflation fears, fluctuating commodity prices, and concerns about slower global growth. EM assets remain susceptible to external shocks, despite some markets demonstrating resilience.