Poor News....Capital Flows to EM

by Michael J. Howell27. March 2013 11:36

Latest End-February data on net capital flows to EM do not make great reading. The late-2012 rally in net inward funds has died out. Both Jan and Feb saw net out flows totalling US$0.5 trillion at an annualised rate. Excluding the BRICs, other EM managed a small US$0.1 trillion annualised net inflow. China looks bad. We have had 10 of the last 12 months showing large net outflows. The only brigt spots are India where inflows continue strongly, Indonesia, Czech, Poland, South Africa and Turkey. Capital inflows are important for monetary conditions since they often lead EM Central Bank policy actions. As we have warned, the strong US dollar is starting to weigh heavily.

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