Emerging markets – Feature


There are many reasons justifying the exodus from emerging markets, but, as Andrew Holt explains, investors should not be too hasty.


Heading for the exit


Indeed, investor confidence in China appears to have been damaged with investors racing to get their cash out of the coun- try. In March, foreign investors withdrew a mammoth $11.2bn (£8.5bn) from Chinese bonds and $6.3bn (£4.8bn) from equi- ties, according to the Institute of International Finance. This makes China responsible for a vast majority of the $9.8bn (£7.5bn) in emerging market net outflows during the month –


and, it should be noted, the first outflow figure for a year. “Downside risks for emerging markets are significant,” says Jose Perez-Gorozpe, head of emerging markets credit research at S&P Global. “Additional inflationary pressures and persis- tently high energy prices could result from an extended con- flict between Russia and Ukraine, especially if sanctions on Russia hit its hydrocarbon exports.” He adds that governments are fighting battles on several fronts.


Issue 113 | May 2022 | portfolio institutional | 51


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