Foreigners pile $29 billion into EM portfolios in December, $179 billion in 2023 -IIF

NEW YORK (Reuters) – Foreigners added a net $29 billion into emerging market debt and equity portfolios in December enticed by a view that the U.S. Federal Reserve will soon ease monetary policy, taking the 2023 estimated net inflow near $179 billion, the Institute of International Finance said on Thursday.

The overall December figure compares to an inflow of $41.1 billion in November and outflows of $5 billion in December 2022.

Yearly estimates show a net $82.2 billion outflow from China portfolios, while EM ex-China saw $261.1 billion in net non-resident portfolio inflows.

Stock portfolios posted an $18 billion inflow last month, the largest since January 2023, while debt portfolios attracted $11.1 billion, marking 10 months of inflows for the asset class last year.

Flows to equities in EM ex-China jumped to $21.4 billion, the highest since November 2022, while the $10.9 billion inflow into ex-China debt meant every month but June saw inflows last year.

The flow to ex-China equities last month was supported by “the closing-year rally in U.S. markets and relative cheap valuations across a handful of EMs,” said in a statement IIF economist Jonathan Fortun.

“Foreign investors’ ownership of local government debt in countries like Brazil, the Czech Republic, Indonesia, and South Africa still lags significantly behind levels observed before the pandemic, which represents an opportunity for larger debt inflows in 2024,” he added.

Chinese equities saw a 3.4 billion outflow to end the year but bonds eked a $0.2 billion inflow, just the second month of positive flows in all of 2023.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)