Investors rattled by events in Turkey, China and South Africa have pulled $1.3 billion out of emerging-market stocks in the last week and $100 million from bonds, according to a report by Reuters.
Citing the Institute of International Finance which tracks financial flows, Reuters said that the exodus of investment money this week has largely been concentrated in South Africa and China – amounting to $600 million (R8.7 billion) and $500 billion, respectively.
However, India has also turned negative this week as debt flows reversed, and Malaysia, Indonesia, Korea, Philippines, Korea and Vietnam have all seen money leave, albeit at moderate pace.
“Turbulence, amid heightened tensions between the U.S. and Turkey, has clearly weighed on investor appetitive for emerging market assets,” the IIF said in a new report.
South Africa’s reliance on portfolio debt and equity flows to finance its large and widening current account deficit has amplified its moves, it added.
Nearly 80% of foreign investor flows to South Africa since 2015 have been in the form of portfolio investment — buying assets like bonds or shares. Direct investment, such as building a factory, accounted for less than 10 percent of total inflows.
“The impact of market strains is likely to be most acute for countries with relatively large external financing needs,” the IIF said.
At 16:00 on Thursday (16 August), the rand was trading at R14.50 to the dollar.