by Elena Popina at Bloomberg
This week, investors relived a nightmare.
As markets from China to South Africa tumbled, they pulled $2.7 billion out of developing economies on Aug. 24. That matches a Sept. 17, 2008 exodus during the week Lehman Brothers went under. The collapse of the U.S. investment bank was a seminal moment in the timeline of the global financial crisis.
The retreat from risky assets, triggered by concern over a slowdown in China and higher interest rates in the U.S., has taken money outflows from emerging markets to an estimated $4.5 billion in August, compared with inflows of $6.7 billion in July, data compiled by Institute of International Finance show.
It’s lower stock prices that people are most worried about.
Equity outflows from developing nations increased to $8.7 billion this month, the highest level since the taper tantrum of 2013 when the prospect of higher rates in the U.S., making riskier assets less attractive, first shook emerging markets.
Debt inflows softened this month while remaining positive at $4.2 billion, the IIF says.
“Emerging market investors have been spooked by rising uncertainty about China, and stress has been exacerbated by a combination of fundamental concerns about EM economic prospects and volatility in global financial markets,” Charles Collyns, chief economist at the IIF, said in an e-mailed comment.