Investors retreat from emerging markets for seventh month

jueves 28 de enero de 2016 10:37 GYT

By Tariro Mzezewa

NEW YORK Jan 28 (Reuters) - Emerging markets suffered $3.6 billion of portfolio outflows in January, the seventh straight month of losses, as renewed concern about sluggish global growth decreased investor appetite for risk assets, the Institute of International Finance said on Thursday.

The Washington-based group, one of the most authoritative sources of data on investment flows to the developing world, said that emerging market equities saw $8.9 billion of outflows while emerging debt markets had inflows of $5.3 billion.

January's outflows were driven by investor anxiety about slowing Chinese economic growth and currency devaluation, but the outflows were smaller than those seen during the late-August selloff.

The month's retrenchment was also fueled by slumping oil prices, which fell to a 12-year low earlier in the month, causing volatility in global markets.

"Falling oil prices, the global equity selloff, widening bond spreads, and the VIX rebounding above 25 all reflect another risk-off period in financial markets, leading investors to pull money from EMs," the IIF said.

The modest inflows to emerging market bonds were driven by market expectations that the Federal Reserve will delay raising interest rates this year.

"The recent volatility and dovish signals from the Fed have led market participants to push out expectations for future Fed rate hikes, supporting flows into EM bond funds," said the IIF.

Regionally, emerging Asia had the highest outflows of $4.3 billion, while Latin America saw $4.2 billion of inflows. All regions except Latin America had outflows for the third consecutive month. (Reporting by Tariro Mzezewa; Editing by Nick Zieminski)