Suffering of the emerging markets

Investors withdrew from the emerging markets $1.4 billion

 

International Finance Institute (IIF) announced that investors withdrew from the emerging markets $1.3 billion invested in assets and 100 million dollars located in government bonds.

 

The sale of assets and debt securities in emerging markets accelerated last week due to the sharp decline of the Turkish lira and fears related to the global trade war caused by the US imposing duties on export goods from many countries, including China.

 

The strong dollar exchange rate, rising costs of loans and energy also prompted investors to seek safer investments.

 

"Turbulence caused, among others, by increased tensions between the US and Turkey has obviously reduced investors' appetite for emerging economies," the IIF report said.

"Tensions in the market will be most severe for countries that have relatively high demand for external financing," warns IIF.

Most funds were withdrawn from South Africa - $600 million. - and China - $500 million. With a slight delay, i.e. at the beginning of the week, investors' money began to flow away from India as well. 

 

IIF chief economist Robin Brooks said that the value of the Turkish currency is currently lower than its macroeconomic fundamental valuation, and therefore the lira should strengthen in a year to two. He warned, however, that there was a risk of "plague" because capital flows away from other countries classified by investors as a category of emerging markets, such as Argentina, Egypt, Lebanon, Indonesia and South Africa. Poor assessment of the economic situation of several countries in this category often prompts investors to escape from all emerging markets.