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March set for biggest EM portfolio outflows since September -IIF data

Tom Arnold
·1-min read

By Tom Arnold

LONDON (Reuters) - Emerging market portfolios are on course to suffer their biggest monthly capital outflows since September 2020, with $4.79 billion exiting up to March 26, Institute of International Finance data showed.

As much as $3.03 billion left debt portfolios and $1.75 billion exited equity portfolios up to five days before the end of March, according to the data for weekly net non-resident bond and stock transactions, excluding Turkey and Mexico.

March is set to record the second consecutive monthly exodus from portfolios after $1.94 billion left in February, according to the IIF data.

The outflows reflect the pinch facing emerging markets as, in a move drawing comparisons with the 2013 'taper tantrum', rising U.S. bond yields have prompted investors to dump emerging assets.

Concerns about COVID-19 hotspots such as Brazil and Poland and the recent replacement of Turkey's central bank Governor Naci Agbal have added to market jitters.

"The sharp rise in long-term U.S. yields and broad-based rebound in the USD (dollar) is providing a more challenging environment for emerging market currencies at present," MUFG analysts wrote in a note on Monday.

"The sharp rise in U.S. yields likely played a role as well in the sacking of Governor Agbal by increasing pressure on the CBRT (central bank) to respond by tightening policy more aggressively."

(Editing by David Evans and Richard Chang)