January 3, 2017 / 6:58 PM / a year ago

Emerging markets portfolios have lowest inflows since 2008 -IIF

Jan 3 (Reuters) - Emerging market portfolios recorded the lowest total inflows since 2008 as investors responded to global shocks last year by buying fewer of the developing countries’ assets, a report showed on Tuesday.

Non-resident investors cut inflows to emerging market assets to $28 billion in 2016, with debt portfolios recording substantial outflows, the Institute for International Finance said.

In December, portfolio outflows totaled $3.4 billion, predominately in debt, to give 2016 the weakest level of inflows for emerging markets since the global financial crisis. The $28 billion of inflows for the year was also 90 percent below the average from 2010 to 2014, IIF said.

Emerging markets have been particularly hard hit since the election in November of Donald Trump as U.S. president.

”No single factor stands out as the cause of the retrenchment in portfolio flows to emerging markets,“ IIF said in a statement. ”Rising U.S. yields - partly as a result of the reflationary ‘Trump trade’ but also attributable to a more hawkish Fed - have been the main contributor to the weakness. However, idiosyncratic events in a number of EM countries, including Turkey and India, have weighed on domestic prospects, exacerbating portfolio outflows.

Emerging market debt portfolios had $33.8 billion of outflows, while equity funds drew in $61.4 billion.

Net capital flows from China were the primary driver of outflows with an estimated $96 billion during the year, intensifying from $70 billion in October.

Turkey had the biggest net capital inflows, at $37 billion, followed by India ($33 billion) and Mexico ($30 billion). However, year-to-date net capital inflows to Brazil and India were almost less than half their 2015 levels.

The IIF tracks portfolio flows to eight countries - Indonesia, India, Korea, Thailand, the Philippines, South Africa, Brazil and Hungary. (Reporting by Dion Rabouin; Editing by Dan Grebler)

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