EM portfolios see $22 billion foreign inflow in June -IIF

NEW YORK (Reuters) – Foreigners funneled over $22 billion net into emerging market portfolios in June, the largest amount since January, and China posted its sixth consecutive month of outflows from debt securities, data from the Institute of International Finance showed on Thursday.

Chinese portfolios did eke a net positive month with the $1.9 billion inflow to equities more than offsetting the $1.6 billion outflow in debt.

June saw a $12.3 billion net inflow from non-locals into EM stocks and $9.8 billion to EM debt securities. The net positive $22.1 billion compares to $10.7 billion in May and an $8.8 billion outflow in June 2022.

Flows to Asia were the strongest regionally at $13.5 billion, followed by Latin America with $6.7 billion.

“The emerging market credit outlook should continue to improve as growth slows, inflation eases and the geopolitical climate turns more market-friendly,” said IIF economist Jonathan Fortun in a statement.

“Nevertheless, region-specific factors, upcoming elections and surprises in world markets could derail the momentum that is building.”

Supporting the view of more flows to emerging markets, U.S. inflation data came in on Wednesday at its slowest annual increase since March 2021. The data bolstered expectations that the Federal Reserve is near the end of its tightening monetary policy cycle, welcome news for EM assets.

Futures traders are pricing in a 25 basis-point Fed rate hike in a meeting scheduled in two weeks, but no more rate hikes are priced in this year according to the CME’s FedWatch tool.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)