No convincing pickup in flows to emerging markets aside from China: IIF

LONDON (Reuters): Investors have turned more constructive on emerging markets, the Institute of International Finance (IIF) said in a report last week, though the move into asset markets has only been truly convincing in China.

Following last year’s violent selloff, the combination of solid growth and a more cautious US Federal Reserve should be positive for EM and riskier assets, Robin Brooks, chief economist at the IIF, wrote in a note.

“Our trackers fail to show a sizeable rebound in real money flows to EM beyond China, with flows to key emerging markets like India and South Africa remaining quite weak,” Brooks said.

“The relatively anemic rebound in flows may be due to negative muscle memory from 2018 or – more likely in our view – reflect a broad positioning overhang in EM, after a decade of easy money and near-record inflows.”