By Rodrigo Campos
NEW YORK (Reuters) – Chinese stocks took a record hit as foreign investors yanked $15.5 billion out of emerging market portfolios in August, the largest monthly outflow in a year, as concerns over China’s growth permeated across equities in an otherwise strong year for EMs.
A monthly report from the Institute of International Finance showed non-residents funneled $14.9 billion out of China stocks, the largest monthly outflow on records back to 2015, while Chinese debt saw $5.1 billion in outflows.
Investors were underwhelmed by China’s economic growth and a lack of fresh stimulus measures by the government at the end of July, as the government sacrifices steeper growth for shared prosperity. Fresh turbulence in the property sector added to the negative investor tone.
The broad MSCI stock and currency emerging market indexes posted in August their largest monthly drops since February.
The emerging market outflows highlight “the negative sentiment over (China’s) economic challenges, amid skepticism over measures to stem the economic slowdown,” according to IIF economist Jonathan Fortun.
Earlier on Wednesday Amundi, Europe’s largest asset manager, lowered its view on Chinese equities and said it has upgraded U.S. growth forecasts while downgrading China’s.
Equity outflows ex-China were $6.6 billion last month, the most since September 2022, while ex-China debt securities saw the seventh month of inflows in the last eight, adding $11.1 billion.
“Diminished currency volatility (…) is encouraging foreign creditors to benefit across EM local yield curves,” Fortun said.
Emerging Asia and Latin America saw outflows just below $5 billion last month, while the Africa and Middle East region posted $5.5 billion in negative flows, the IIF report showed.
Equities fell across all geographical regions while debt posted inflows in Asia, Latam and emerging Europe.
Year-to-date numbers through August show a $13.1 billion outflow from China while emerging markets ex-China has seen $139.5 billion in non-resident portfolio inflows.
(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)
