Emerging markets face heavy weekly fund outflows – J.P. Morgan

Investing.com– Emerging market (EM) funds saw significant outflows last week, continuing a tough December for these investments, according to J.P. Morgan’s weekly report.

Bond funds recorded $1.5 billion in outflows, while equity funds experienced an even larger withdrawal of $4.6 billion, J.P. Morgan’s latest EM Flows weekly report showed.

The bond outflows were led by hard currency funds, which saw $1 billion outflows, an increase from $508 million the week before. Local currency funds saw a smaller decline of $480 million, slightly down from $496 million in the prior week.

On the equity side, the sharp increase in outflows came mostly from exchange-traded funds (ETFs), which recorded a net outflow of $3.1 billion, compared to $262 million a week earlier. Non-ETF equity funds saw reduced outflows at $1.5 billion.

Year-to-date, total outflows from EM bond funds stand at $28.2 billion, while EM equity funds have lost $30.3 billion. The year has been marked by volatility, as investors balance risk sentiment against global macroeconomic challenges, such as interest rate hikes and geopolitical uncertainty.

Despite the overall weak trend, some bright spots were noted. Foreign portfolio flows into EM local bonds were positive, led by Indonesia, which attracted $584 million in net inflows. However, foreign equity investments were less promising, with Korea recording the largest outflows at $847 million.

The data reflects growing caution among global investors, with sentiment heavily influenced by inflation worries, fluctuating commodity prices, and concerns over slower global growth. The report underscores how EM assets remain vulnerable to external shocks, even as some markets show resilience.