Trade war flare-up spurs biggest EM outflows in seven months: IIF

Emerging markets saw the heaviest capital flight since last October in recent weeks as trade tensions between China and the United States escalated, the Institute of International Finance (IIF) said in a report on May 15.

US President Donald Trump surprised global markets last week by hiking tariffs on Chinese goods in the midst of trade negotiations, saying China had backtracked on earlier commitments. Beijing retaliated on May 13.

The emerging market exodus was led by Chinese equities, which saw outflows of $1.5 billion on May 13, after investors took $2.5 billion off the table last week, according to the IIF.

Outflows from Taiwan hit $400 million on My 15, and other emerging Asian countries, such as South Korea, India and Indonesia, "have mirrored China's trend, highlighting the risks to the broader EM complex from increased US-China trade tensions," said IIF economists Jonathan Fortun and Greg Basile.