There are fewer Chinese securities in investors’ portfolios

Portfolio investments in emerging markets decreased in August for the first time since the fall of 2022, according to a report by the Washington-based Institute of International Finance (IIF). The total figure decreased by $15.5 billion. At the same time, investments in stocks decreased by $21.5 billion, and an influx of $6 billion was recorded in bonds. In July, the total inflow of funds into emerging markets was $32.8 billion: $17 was invested in stocks .6 billion, in debt obligations – $15.2 billion.

Over the eight months of the year, the outflow of funds from China amounted, according to IIF estimates, to $13.1 billion, and the inflow of capital to other developing countries amounted to $139.5 billion. The most serious in August was the outflow of funds from the Chinese stock market – a record $14.9 billion ( in July, investments in shares increased by $7.7 billion, in June – by $1.9 billion). On the bond market, the outflow of funds from China amounted to $5.1 billion. The dynamics are explained by worsening expectations regarding the rapid recovery of China. In addition to the weak July statistics, investors were also disappointed by the restrained measures of the Chinese authorities to support the economy (note that at the end of the month they were expanded; see Kommersant of September 1). The growth of investments in Chinese stocks was also hampered by the ongoing decline in the real estate market. Investment in the sector fell for the 18th month in a row in August. It should be noted that August data (including on industrial production and retail sales) indicate that the pace of recovery of the Chinese economy has accelerated somewhat (see Kommersant on September 18).

In other emerging markets, an outflow of funds from equity markets was also recorded in August – in the amount of $6.6 billion (the maximum since September 2022). The IIF expects that in the short term capital outflow will be replaced by an influx, explaining this by the fact that forecasts about the future of the US economy are becoming more optimistic, and the rate of price growth continues to slow down. Let us recall that the outflow of investments last year was largely facilitated by the risks of recession in several large economies at once, including the United States (see “Kommersant” dated July 8, 2022). Investments in debt securities of developing countries remained attractive for investors in August: the inflow of funds into bonds in these countries (excluding China) amounted to $11 billion.

Kristina Borovikova