NEW YORK, June 30 (Reuters) - Emerging market portfolios saw $17.8 billion of net non-resident portfolio flows in June, marking the seventh straight month of positive foreign inflows to the asset class, the longest streak since late 2014, a banking survey showed on Friday.
The Institute for International Finance estimates that total inflows in June were down slightly from $20.2 billion in May, with about $13 billion flowing into debt and $5 billion to equity markets, respectively.
“We remain cautiously optimistic on the overall outlook for EM capital flows given the very shallow pace of Fed tightening expected by markets — well below the Fed dots — but cognizant of potential headwinds,” IIF said in a statement.
Regionally, emerging markets in Asia were responsible for the lion’s share of all inflows in June, drawing $15.8 billion in combined equity and debt, with debt inflows to India playing a large role. Asia was followed by EM Europe, with $2.0 billion, while a modest bump in Latin American of $0.6 billion offset a similar drop in Africa and the Middle East of $-0.5 billion.
May marked the strongest pace of emerging markets net capital inflows, excluding China, since the U.S. election, rising to $16.5 billion. That was up from $2.5 billion in April. IIF reported that the strong upswing was mainly driven by robust inflows to Turkey, at $9.2 billion, India with $9 billion, and Mexico, at $2.3 billion. In contrast, net capital flows to Brazil turned negative in May, IIF said, hurt by a sharp contraction in non-resident capital inflows.
On May 17, secret recordings of Brazilian President Michel Temer were released that alleged Temer was discussing a bribery plot with Joesley Batista, chairman of the country’s largest meat-packing firm JBS, to pay a monthly allowance to former House Speaker Eduardo Cunha.
Brazil’s benchmark Bovespa stock exchange, real currency and government bonds all sold off following the news. (Reporting by Dion Rabouin; Editing by Chizu Nomiyama)