EM Portfolio Flows Slow to $21.7B in February
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- Non-resident investors added a net $21.7 billion to emerging market portfolios in February, down from January's record $100.5 billion and below the $45.5 billion recorded in February last year, per the Institute of International Finance.
- IIF senior economist Jonathan Fortun said the month-to-month slowdown is "best read as a normalization after an outlier January print," not a fundamental shift in investor appetite.
- Debt markets absorbed $14.3 billion of the February flows, while equity inflows slowed to $7.4 billion from $28.0 billion in January, and the IIF noted the data predates a deterioration in global risk sentiment triggered by the U.S.-Israeli war on Iran.
- Latin America led February equity allocations with $6.9 billion, while China stocks drew $5.2 billion; Asia equities overall recorded net outflows as selling in South Korea offset inflows elsewhere.
- Asia led debt inflows at $5.9 billion, followed by Latin America ($4.3B), emerging Europe ($2.6B), and MENA ($1.5B); China's debt market attracted just $400 million while emerging markets outside China drew $13.8 billion, a pattern the IIF said shows investors prefer higher-yielding markets outside China.
- South Korea was flagged by the IIF as an area of weakness in February flows and has since seen particularly steep equity losses, even though the benchmark KOSPI remains strong on a year-to-date basis.
- Indonesia saw a sharp bout of outflows from both equities and sovereign bonds late in the month following domestic market concerns, though the IIF said the episode remained localized and did not spread across other EM assets.
Why it matters: The headline number looks like a sudden emerging-market retreat, but the IIF itself frames it as a cooldown from an unusually strong January — and the data predates the Iran war's risk-off shock, meaning the real stress test is still ahead in March. Investors are also becoming more selective, allocating $13.8 billion to ex-China EM debt versus just $400 million to China, signaling that policy credibility and market depth are increasingly driving the split.
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