Emerging Markets Attract Second Month of Inflows as Bonds Trump Stocks
On.cc · 1 SOURCES1 day ago2 MIN
Summary
The Institute of International Finance (IIF) reported that emerging markets attracted USD 11.3 billion (approximately HK$88.14 billion) in net inflows during August, representing the second consecutive month of positive flows . This occurred despite US 10-year and 30-year Treasury yields climbing to multi-year highs, breaking the conventional wisdom that rising US borrowing costs always trigger capital withdrawals from developing economies . Bond markets dominated these inflows, capturing USD 11.2 billion, while equities attracted only USD 100 million, ending a two-month streak of equity outflows . Foreign investment concentrated in Taiwan and India, while South Korea experienced significant selling pressure . Year-to-date bond inflows of USD 243.5 billion have more than offset the USD 87.5 billion in equity outflows, supporting overall positive portfolio flows into emerging markets .
Key Points
- Emerging markets received USD 11.3 billion in net inflows in August, following the revised July figure of USD 24.9 billion, marking two consecutive months of positive flows
- Bond markets captured USD 11.2 billion of the August inflows, representing approximately 99% of total emerging market portfolio investment, while equities received only USD 100 million
- The IIF revised July's initial inflow figure upward from USD 18.8 billion to USD 24.9 billion, making it the second-largest single-month inflow since Q2 2026
- Foreign buying concentrated in Taiwan and India, while South Korea faced renewed selling pressure; China-related stocks attracted USD 3.5 billion excluding mainland equities
- Year-to-date bond inflows of USD 243.5 billion exceed the USD 87.5 billion equity outflows, resulting in overall net positive portfolio flows for emerging markets
Why It Matters
The sustained inflows suggest international investors view emerging market debt as offering attractive risk-adjusted returns even in a rising US rate environment . This challenges the traditional capital flow model and may signal a structural shift in how global portfolios allocate to developing economies .
The sustained inflows suggest international investors view emerging market debt as offering attractive risk-adjusted returns even in a rising US rate environment . This challenges the traditional capital flow model and may signal a structural shift in how global portfolios allocate to developing economies .