March set for biggest EM portfolio outflows since September -IIF data By Reuters

By Tom Arnold

LONDON (Reuters) – Emerging market portfolios are on course to suffer their biggest monthly capital outflows since September 2020, with $4.79 billion exiting up to March 26, Institute of International Finance data showed.

As much as $3.03 billion left debt portfolios and $1.75 billion exited equity portfolios up to five days before the end of March, according to the data for weekly net non-resident bond and stock transactions, excluding Turkey and Mexico.

March is set to record the second consecutive monthly exodus from portfolios after $1.94 billion left in February, according to the IIF data.

The outflows reflect the pinch facing emerging markets as, in a move drawing comparisons with the 2013 ‘taper tantrum’, rising U.S. bond yields have prompted investors to dump emerging assets.

Concerns about COVID-19 hotspots such as Brazil and Poland and the recent replacement of Turkey’s central bank Governor Naci Agbal have added to market jitters.

“The sharp rise in long-term U.S. yields and broad-based rebound in the USD (dollar) is providing a more challenging environment for emerging market currencies at present,” MUFG analysts wrote in a note on Monday.

“The sharp rise in U.S. yields likely played a role as well in the sacking of Governor Agbal by increasing pressure on the CBRT (central bank) to respond by tightening policy more aggressively.”