Emerging markets net inflows of US$76.5 billion in November hit a record high

Data released by the International Finance Association (IIF) on Tuesday showed that, including stocks and bonds, emerging markets had a net inflow of US$76.5 billion in November, a record high. Progress has been made in vaccine development for the new coronavirus, and the market’s willingness to invest in risky assets has rapidly recovered. Both stock prices and currencies have risen sharply, and it is easier to support the economy. However, with the rapid strengthening of optimism, there is also the risk of increased reverse volatility.

Data show that in November, the net purchases of stocks in emerging market countries were 39.8 billion U.S. dollars, and the net purchases of bonds were 36.7 billion U.S. dollars, both hitting the largest amount this year. In terms of regions, India and China have inflows of nearly US$8 billion, and investment in Thailand and Indonesia has also increased. Funds also flowed to South Africa and Turkey, where the economic situation is unstable.

As the development of the new crown vaccine progresses, investors’ risk appetite has risen. At the same time, the political situation in the United States has stabilized, and the inflated funds of developed countries have become increasingly active. The emerging-market ETF fund managed by BlackRock, the world’s largest asset management company, received US$1.6 billion in funding in November. In addition, currency and bond ETFs in emerging market countries are also popular.

In addition, the commodity market is rising, which is also bringing positive effects. Crude oil and copper, which are highly linked to the world economy, rose sharply. The economic stability of countries that rely on resource exports is expected. Ian Tomb of Goldman Sachs believes that “with the global economy maintaining a good state, the currencies of emerging market countries may further appreciate significantly”.

The depreciation of the dollar is also a factor. Fed Chairman Powell has repeatedly emphasized the attitude of maintaining strong monetary easing. Many people in the market speculate that the Federal Open Market Committee (FOMC) meeting from December 15 to 16 will discuss expanding quantitative easing. As the market believes that strong fiscal stimulus and monetary easing will continue, the U.S. dollar has maintained a depreciation trend against the currencies of other developed countries.