The Emerging Market (EM) securities attracted an estimated around $17.1bn in April, a large improvement compared to a record-breaking $83.2bn outflow in March. The recovery is mainly supported by debt flows and China equity flows, Institute of International Finance (IIF) noted yesterday.
While the impact of COVID-19 was first noticeable in January and contained to China, a wider spread of the pandemic during March rattled markets creating a shock to EM. During April, the cascading nature of the pandemic left some EM markets depressed, while others stabilized.
Thus, we see a clear distinction between equity and debt flows for this month. Debt flows picked up, reaching $15.1bn. On the equity side, the negative trend which we observed last month continued.
Outflows from EM x/ China equities amounted to $6.3bn, while flows to China equities partially recovered, posting a net inflow of $8.2bn, highlighting the divergence between China and the rest of the EM complex.
Regionally, the increase in debt flows was distributed between EM Asia—experiencing an inflow of $7.3bn— followed by $3.0bn in Latin America. Despite improving flows, IIF believes that not all EMs are in the clear yet, as the combination of lingering uncertainty around COVID-19 and limited policy space is a challenge for some.
