Emerging Market Capital Outflows

Two weeks ago, FT: Emerging markets suffer biggest weekly outflow in 7 years

In total, $9.3bn left EM funds in the week to Thursday, according to data from funds tracker EPFR, the most since 2008. Of that, $7.1bn came from Chinese equity funds, which had previously seen three weeks of robust inflows including a record $4.6bn in the last week of May. Global EM funds saw $829m of withdrawals, while Latin America funds lost $442m.

It appears this was the smart money based on the reports that have followed.

FT: Bank for International Settlements warns of emerging market risks

Economists and foreign investors may have overestimated the potential economic output of a quintet of Latin American countries by 2 percentage points, leading to the possibility of sharp financial outflows when reality sinks in.

Bloomberg: Brazil ETF Leads Emerging-Market Outflows as Greece Adds to Woes

The iShares MSCI Brazil Capped ETF had about $800 million in withdrawals in the first six months of 2015, according to data compiled by Bloomberg. The fund extended this year’s slump to 11 percent. The Ibovespa retreated 1.9 percent to 53,014.21 at the close of trading in Sao Paulo, the most in a month.

Brazilian shares have dropped 8.7 percent from this year’s high as the nation struggles to shore up the budget and keep its investment-grade credit rating at a time when the economy is set for the worst recession in 25 years. Stocks joined a global rout Monday after Greece shut lenders and imposed capital controls, a measure that will deepen the country’s recession and risk driving it out of the euro.

Nikkei: US rate hike fears make Asia vulnerable to capital outflows

Matthew Sutherland, senior investment director for Asian equities at Fidelity Worldwide Investment, named Indonesia as the most susceptible to the impact of the expected U.S. interest rate increase. "The consensus view is that Indonesia is quite vulnerable," he said, "because they have the biggest current-account deficit in the region."

The Indonesian monetary authorities are trying hard to relieve growing investor concerns. Juda Agung, executive director of economic and monetary policy at Bank Indonesia, the country's central bank, underscored that the country is running a "high-quality current-account deficit," reflecting its infrastructure expansion.

Indian Express: Explained: Capital outflows, pressure on Rupee, but no big India damage likely

The big positive for India since the Greek crisis first unfolded is that it has made the most progress in steadying the domestic economy among all of what used to be the fragile five. According to Sameer Goel of Deutsche Bank, India has taken the biggest strides on fundamental macroeconomic indicators, particularly by way of stabilising external imbalances and accumulation of foreign exchange reserves, so the RBI’s capability to defend the rupee against big capital outflows is much better now.

On the flip side, there have been substantial foreign inflows — well over $ 60 billion — into the Indian debt and equities market over the last 18 months. This raises questions whether some of this money could be vulnerable to exit, should the crisis intensify.

Is the pessimism overdone?
Barron's: Emerging Bond Market Fed Fears Overdone, Fitch Says

The U.S. dollar dropped off the radar after topping in March, but to this point it still looks like a correction within a bull market.