Foreign capital flow into emerging market climbs to $25 bn

Emerging markets has witnessed an inflow of USD 25 billion from foreign portfolio investors in this month so far, with equity segment becoming the dominant driver for funds, says a report.

Equity flows were the dominant driver this month, with an estimated USD 14.6 billion in inflows, while debt flows were more moderate at USD 10.2 billion, according to the report by Institute of International Finance.

Inflows were dominated by EM (emerging market)Asia, followed by Latin America, while EM Europe and Africa, Middle East saw modest outflows.

"Regionally, EM Asia saw total inflows of USD 19.1 billion, followed by Latin America with inflows of USD 8.7 billion, while there were modest outflows from EM Europe and AFME," the report noted.

Portfolio flows to EMs rose to USD 24.8 billion in July from USD 13.3 billion in the preceding month. Prior to that, emerging markets saw an outflow of USD 12.3 billion in May.

"In fact, July marked only the second month over the past year where portfolio flows were above their long-term average of USD 22 billion," it added.

The recovery in flows during the past few months follows a period of exceptional weakness in EM portfolio flows that began with China's mini-devaluation almost a year ago and saw cumulative outflows of USD 81 billion from EMs, compared to USD 96 billion during the global financial crisis.