NEW YORK,. Foreign investors have pulled about US$5.5 billion (RM22 billion) out of emerging market economies since the US Federal Reserve’s interest rate hike last week, data from the Institute of International Finance showed yesterday.
Outflows from emerging market equities totaled about US$4.2 billion since the Fed’s policy meeting, while some US$1.3 billion came out of bonds.
Foreign investors sold more than US$320 million of Chinese stocks yesterday, the first daily net selling by foreigners since May 4, IIF said.
China had remained resilient amid steep outflows from emerging markets, but “concern about the impact of additional US tariffs on Chinese imports (has) prompted a sharp reversal in flows to China,” the IIF said in a statement.
China accused the United States of “extreme pressure and blackmailing” and vowed to retaliate after Trump on Monday threatened to slap a 10 per cent tariff on US$200 billion of Chinese goods in addition to the import duties previously announced on US$50 billion in goods.
Emerging market outflows over the last week were concentrated in Asia, IIF said, signalling increased concern over the US-China trade dispute.
Emerging market economies have been in focus since mid April after an unexpected jump in the US dollar while expectations for higher US interest rates has driven money flows away from emerging markets since mid April.
The steep selloff in China, where the local stock index fell 3.8 per cent yesterday, dragged the MSCI emerging markets index to its lowest level since October.
Both indexes peaked so far in 2018 in late January and have dropped 14 per cent or more since.
Bargain hunters had stepped up to grab emerging market assets in early June after foreigners dumped a combined US$12.3 billion of bonds and stocks in May, IIF said.
The Fed last Wednesday raised its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 per cent to 2 per cent, and dropped its pledge to keep rates low enough to stimulate the economy “for some time.”