Capital outflows from developing countries reached $120 billion last quarter, the most since 2009, fueled by an exodus from China amid concern over the strength of the country’s economy, according to JPMorgan Chase & Co.
It was a reversal from the first quarter when emerging markets had $80 billion of inflows, analysts led by Nikolaos Panigirtzoglou wrote in a note Friday. Investors pulled $142 billion from China between April and June.
That extended the total outflow from the world’s second-largest economy over the past five quarters to $520 billion, wiping out all the inflows since 2011 when the country’s growth started to slow, the analysts said.
Capital is leaking out from emerging markets as their economic expansion slows. The outflow helped drive up government bond yields in developed nations as emerging-market central banks sold securities such as U.S. Treasuries and German bunds in their foreign-exchange reserves to offset the outflow, according to JPMorgan.
“Emerging-market assets suffered a sharp sell-off over the past two months, raising questions once again about credit creation and capital flows,” Panigirtzoglou said.
The yield increase in developed-nation debt in the second quarter was “a good reminder of how important foreign-currency reserve managers remain in driving core bond markets.”
New York-based JPMorgan estimates the capital flow by deducting current account figures from changes in foreign reserves.
bloomberg.com
It was a reversal from the first quarter when emerging markets had $80 billion of inflows, analysts led by Nikolaos Panigirtzoglou wrote in a note Friday. Investors pulled $142 billion from China between April and June.
That extended the total outflow from the world’s second-largest economy over the past five quarters to $520 billion, wiping out all the inflows since 2011 when the country’s growth started to slow, the analysts said.
Capital is leaking out from emerging markets as their economic expansion slows. The outflow helped drive up government bond yields in developed nations as emerging-market central banks sold securities such as U.S. Treasuries and German bunds in their foreign-exchange reserves to offset the outflow, according to JPMorgan.
“Emerging-market assets suffered a sharp sell-off over the past two months, raising questions once again about credit creation and capital flows,” Panigirtzoglou said.
The yield increase in developed-nation debt in the second quarter was “a good reminder of how important foreign-currency reserve managers remain in driving core bond markets.”
New York-based JPMorgan estimates the capital flow by deducting current account figures from changes in foreign reserves.
bloomberg.com
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