EM portfolios add $274 billion of overseas inflows in 2024, IIF says

By Rodrigo Campos

NEW YORK (Reuters) – Overseas buyers added $273.5 billion to their rising market fairness and debt portfolios final yr, almost $100 billion greater than in 2023, based on a financial institution commerce group’s preliminary information revealed on Friday.

The $273.5 billion of inflows for 2024 topped the $177.4 billion in 2023 although it was beneath the $375 billion common between 2019-2021, based on the report from the Institute of Worldwide Finance.

Nearly all of the influx was cash put into fastened revenue final yr with $219 billion added to debt exterior China and $54.2 billion to Chinese language debt. The image was extra cut up in shares, the place Chinese language equities raked in $11.3 billion whereas these elsewhere within the growing economies world misplaced $11 billion, the information present.

U.S. progress and the power of the greenback have been headwinds to investing in rising markets many of the yr, and the Federal Reserve itself has downgraded its expectations for price cuts in 2025 – which in flip supplies but extra help to the greenback.

Indicators of a looser financial coverage within the U.S. can be supportive of EM property basically.

“All through 2024, the sturdy greenback and elevated U.S. yields created vital headwinds for EM equities and sure debt markets, a development that will reverse if the Fed begins signaling price cuts within the coming months,” mentioned IIF economist Jonathan Fortun in a press release.

“Whereas Fed dovishness would supply a much-needed tailwind, sustained restoration in EM equities will doubtless require additional readability on world progress prospects and focused coverage measures in key markets like China,” he mentioned.

JPMorgan warned on Thursday of a sudden cease of flows to rising markets as a robust U.S. financial system retains buyers away from growing nations seen as riskier.

But idiosyncrasies will proceed to dictate flows, as seen by fairness inflows in December to India, Brazil, Saudi Arabia and Taiwan.

The breakdown of IIF information by month confirmed non-residents added a web $14.4 billion to rising market portfolios in December, with shares posting web general outflows.

Regionally, Latin America led inflows with $6.6 billion adopted by Rising Asia with $5.3 billion, whereas Africa and the Center East, and Rising Europe pulled in $1.7 billion and $1.1 billion respectively.