The organisation estimates net outflows to have reached $24.2bn over the month, with EM debt funds accounting for about two thirds of those. The figures confirm Donald Trump’s election indeed threatens to be a game-changer for emerging markets. The November outflows have put an end to a four-month string of net inflows into emerging market equities and debt. From July to October, European investors alone had been investing a net sum of €41.5bn ($43.8bn) in EM assets, with the majority of flows going into EM debt funds.
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Emerging Asia, with net outflows of $15.9bn, was the region hardest hit by the ‘Trump Tantrum’, as investors fear the region will be affected by possible protectionist measures by the incoming Trump administration, as well as a more hawkish Fed. Net outflows from Latin American were more modest, but also relatively sizeable at $2.4bn.
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According to the IIF, an increase in Fed rate rise expectations (which is for a large part a consequence of the inflationary effects of some of Trump’s presumed policies) remains the largest explanatory factor for the outflows, just as was the case during 2013’s Taper Tantrum.
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“Our behavioural model indicates that rising Fed policy expectations made a negative contribution of over $13bn [to outflows] this month,” the IIF said. “Domestic factors were also a driver, perhaps including heightened concerns about the EM growth outlook given a less-friendly backdrop for global trade and EM exporters.