No sign of Brexit hit to emerging market asset flows, says IIF

Friday, 1 July 2016 00:00 - - {{hitsCtrl.values.hits}}

Untitled-7 Reuters: Early signs show that last week’s vote by Britain to leave the European Union has had no immediate impact on emerging market asset flows, the Institute of International Finance (IIF) said on Thursday.

The IIF said daily EM portfolio flows data suggested outflows were a fairly minor $210 million on “Brexit Friday” and had seen some recovery since then.

That relatively modest selling compared with $2.7 billion on August 24 in 2015 when concerns about China’s economy and a devaluation of its currency triggered global financial market jitters.

Additional data for the whole of June showed that foreign investors have pumped a net $16.7 billion into emerging market assets during the month, a big improvement on a near-zero total in May, although shy of the 2010-2014 average of $22 billion.

It added the buying was concentrated largely at the start of the month before the June 23 Brexit vote and was quite evenly distributed across equities and debt, with inflows of $9.3 billion and $7.4 billion respectively.

There was also near-record emerging market debt issuance in June.

Regionally, EM Asia saw inflows of $13.7 billion, while Africa and the Middle East had $3.6 billion as South African equities saw a record amount of buying from foreign investors.

“Early indications suggest that the Brexit vote had limited immediate impact on portfolio flows to emerging markets,” the IIF said.

“This picture is consistent with an overall muted impact on EMs to date, despite the spike in risk aversion, helped in part by anticipation that Fed rate hikes will likely be pushed back further.”