Foreigners dumped more cash into emerging market portfolios in November than any month since June 2021, even as Chinese debt continues to see outflows, the Institute of International Finance IIF said on Thursday.
Foreign investors added $37.4 billion to emerging market portfolios last month, with fixed income attracting $14.4 billion in the strongest monthly inflow this year.
Flows to Chinese equities also saw their largest monthly increase this year, at $8.5 billion, but Chinese debt continued to see outflows that now total almost $77 billion in 2022, according to their largest monthly increase this year.
Non-resident investor flows to China have essentially stopped, which is consistent with the stories that market participants have picked up from market participants who are more attuned to geopolitical risk, said Jonathan Fortun, IIF economist.
China has loosened COVID 19 quarantine rules in a major policy adjustment, which could reverse the flow of cash back into portfolios in the world's second-largest economy.
The low prices of the Chinese stock index have enticed investors even before the new COVID rules, and the Chinese stock indexes have had a rough year. Shanghai stocks rose nearly 9 percent last month and are down 12 per cent YTD compared to Hong Kong, down 17 per cent so far in 2022, and added 27 per cent last month. The China MSCI index, priced in dollars, increased almost 30 per cent in November.
The yuan gained 3 per cent against the dollar last month, but is still down close to 9 per cent this year, still on track for the largest yearly losses in almost three decades.
The IIF regional data showed an inflow of $25.6 billion to Asia, while Latin America took in some $8.2 billion, the most since March, and emerging Europe another $3.2 billion. Africa and the Middle East took in $0.4 billion in the first positive reading since March.