Emerging Markets Suffer Largest Outflow in Seven Years

Emerging markets are out of favor.

Global investors have yanked $9.3 billion from stocks in developing countries in the week to Wednesday, the most since the depths of the global financial crisis in 2008. Asia has been particularly vulnerable with $7.9 billion pulled out of the region’s equity markets, the most in almost 15 years, according to data provider EPFR Global.

Financial markets in emerging markets have been grinding weaker with currencies trading at their weakest levels in years, and bonds have been caught in the riptide too. Including bonds, investors have pulled out the most money since 2013’s “taper tantrum.”

The dangers of emerging markets are well-known to investors and analysts, but the magnitude of this selloff has caught many by surprise. It follows a selloff in Treasurys and German bunds that has rocked global sentiment, and comes ahead of the U.S. Federal Reserve raising interest rates later this year that is likely to send money back to developed markets.

An Indonesian man walks in front of a display showing share prices at the stock-exchange building in Jakarta in March. Stocks in Indonesia are among the worst performers in Asia this month.ENLARGE

“Money is gradually leaving emerging markets, including Asia,” said Paul Chan, chief investment officer of Asia ex-Japan at Invesco Ltd., which manages $812 billion globally. “It’s a repeat of 2013, but this time we are slowly pricing in the eventual rate hike.”

Mr. Chan’s fund has been cutting its investments in Southeast Asia but adding in South Korea this year. It has been overweight on China and India in recent years.

Analysts say emerging-market equity-fund managers are increasingly feeling the pain of plummeting currencies in the region,

Originally appeared at: http://davidstockmanscontracorner.com/emerging-markets-suffer-largest-outflow-in-seven-years/