China stocks lead foreign exodus from emerging markets in August

New York — Chinese stocks took a big hit as foreign investors yanked $15.5bn out of emerging market portfolios in August, the largest monthly outflow in a year, as concerns over China’s growth permeated across equities in an otherwise strong year for EMs.

A monthly report from the Institute of International Finance (IIF) showed nonresidents moved $14.9bn out of China stocks, the largest monthly outflow on records back to 2015, while Chinese debt saw $5.1bn in outflows.

Investors were underwhelmed by China’s economic growth and a lack of fresh stimulus measures by the government at the end of July, as the government sacrifices steeper growth for shared prosperity. Fresh turbulence in the property sector added to the negative investor tone.

The broad MSCI stock and currency emerging market indices posted in August their largest monthly drops since February.

The emerging market outflows highlight “the negative sentiment over (China’s) economic challenges, amid scepticism over measures to stem the economic slowdown,” according to IIF economist Jonathan Fortun.

Earlier on Wednesday Amundi, Europe’s largest asset manager, lowered its view on Chinese equities and said it has upgraded US growth forecasts while downgrading China’s.

Equity outflows ex-China were $6.6bn last month, the most since September 2022, while ex-China debt securities saw the seventh month of inflows in the past eight, adding $11.1bn.

“Diminished currency volatility … is encouraging foreign creditors to benefit across EM local yield curves,” Fortun said.

Emerging Asia and Latin America saw outflows just below $5bn last month, while the Africa and Middle East region posted $5.5bn in outflows, the IIF report showed.

Equities fell across all geographical regions while debt posted inflows in Asia, Latam and emerging Europe.

The year-to-date numbers through to end-August show a $13.1bn outflow from China, while emerging markets ex-China has seen $139.5bn in nonresident portfolio inflows.