Portfolio inflow to emerging markets hit 5-month high at $40.8bn

Portfolio inflow to emerging markets hit 5-month high at $40.8bn

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Portfolio inflows into emerging market after suffering its worst decline last month on the back of the trade dispute between world’s two biggest economies, rose to its highest value in five months to June 2019.

Figures from the Washington-based International Institute of International Finance (IIF) revealed that inflows worth $40.8 billion hit the emerging market last month, driven by strong investors’ appetite for Chinese equities.

While equities flows jumped to $12.6 billion in June, from massive outflows of $14.6 billion last month, debt inflows also surged 213 percent to $28.2 billion in the sixth month, from $9 billion in the prior month.

Chinese equities rebounded from negative $8.7 billion in May to $5.8 billion in June, accounting for nearly half of total equity flows. Debt flows accelerated to its highest level in five months buoyed by strong inflows to EM Asia ($18.3bn), EM Latin America ($5bn), EM Europe ($3.5bn) and EM Africa and Middle East ($1.5bn).

The global finance body maintained that the surge in portfolio inflows signals that investors are positioning for a favourable outcome from trade talks between United States and China, adding that the dovish monetary policy stance of major central banks also contributed to the fast pace of flows to emerging markets.

The space’s net capital flows, which is the difference between how much a country invests outside and amount other countries invests in its, worsened to $18.6 billion in May as trade dispute intensified in the month, some 9 percent uptick from $17 billion in April, driven by China and major oil producers, Russia and Saudi Arabia.

Net capital flows to Africa’s biggest economy, Nigeria, though positive, slowed in two straight months to $700 million in May reflecting that Nigerians are investing less in foreign economies.
Meanwhile Donald Trump, President of the United States of America on Monday said talks with Chinese President Xi Jinping had already commenced.

The pair met over the weekend at the G-20 summit in Osaka, Japan and agreed to play down the tariff war whilst engaging in conversations towards lasting solutions. Consequently previous restrictions on Chinese manufacturer, Huawei, were relaxed.

The Morgan Stanley International Capital (MSCI) emerging market index, which tracks performance of equities in the space rose gained 0.86 percent on Monday (July 1), the most in two weeks, in the first trading session since Group of 20 Summit in Osaka, Japan.

In June, Chinese stocks rose the highest among emerging peers covered by BusinessDay. The Asia giant saw its equities market rise 7.28 percent. Egyptian stocks rose 3.26 percent while South African bourse recorded an improvement of 3.21 percent.

Conversely, Nigerian equities dipped by 4.96 percent in the month as the variance with emerging peers widened on the heels of investor apathy which intensified in the latter part of the first half of 2019 on the diminished growth prospects of Nigerian companies.

 

Israel Odubola & Segun Adams



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