Portfolio inflows to emerging markets jumped to $32.1 billion in June from $3.5 billion in May, the bulk of it in debt securities, the Institute of International Finance said on Wednesday. Debt flows accounted for $23.5 billion of total, while Chinese equities attracted some $6.1 billion, the data on non-resident flows showed.
Equities outside of China reversed an outflow trend to see net inflows of $3.4 billion. Emerging Asia was the region that attracted the most flows last month with $17.1 billion, while Latin America, with $7.3 billion, came second.
Debt issuance picked up significantly in the second quarter, the report said, and is now above the average of recent years. "We see this shift in sentiment as healthy, reflecting deeply discounted valuations in many places, which mean that adverse economic outcomes and weak growth are largely priced," IIF said.
However, the recent buildup in tension between Washington and Beijing is seen as a sentiment dampener toward emerging markets. "Moving forward, we see investors being more discerning regarding investment decisions towards (emerging markets)," the report said.