April 1, 2019 / 12:03 PM / in 21 days

Foreign fund inflows to emerging markets slip to $25.1 bln in March -IIF

LONDON, April 1 (Reuters) - Foreign investor flows to emerging market stocks and bonds slowed in March with weaker currencies weighing despite a dovish turn by the U.S. Federal Reserve and easing trade tensions, Institute of International Finance (IIF) data showed.

Emerging market assets attracted $25.1 billion of non-resident flows in March after inflows of $31.2 billion in February and $52.6 billion in January, said the IIF, which tracks investor flows across capital markets.

Flows into bonds held roughly steady at $17.6 billion in March after $18.2 billion in February, the IIF found. Though developing equities recorded an $8.1 billion inflow compared with the $13.8 billion the IIF reported for February.

“The most profound dovish shift from the Fed since 2016 and more constructive trade talks between China and the US were positive catalysts,” IIF economist Jonathan Fortun wrote in a note.

“However, many emerging market currencies have fallen sharply this year, failing to benefit from the more constructive backdrop,” he added.

Emerging markets had a torrid 2018 as crises in Turkey and Argentina ripped through global markets, pulling stocks nearly 17 percent lower over the year.

Following a selloff in December, the main MSCI emerging market benchmark soared nearly 9 percent in January but then slowed to less than 1 percent gains in both February and March as the rally ran out of steam.

Flows into Chinese stocks came in at $1.6 billion in March. However, in February, the IIF said foreign investors had pumped more than $10 billion into equities in the world’s second-largest economy ahead of benchmark weighting changes.

Stock index provider MSCI said in late February it would increase the inclusion factor of China A-shares in its benchmark indexes to 20 percent by November in a three-step process.

Reporting by Karin Strohecker; Editing by Hugh Lawson

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