Foreign capital outflows from EMs in Asia to be big

2018 has been a year where international investors have shunned stocks and bonds in emerging markets across Asia, a view in stark contrast to what was seen in prior years.

Even with modest capital inflows in November, sparked by hopes of a lasting trade truce between the US and China, net foreign capital outflows are on track to be the largest since the GFC.

“We are certain to see overall net outflows for the first time since 2008. The only question is how large it will be,” says Khoon Goh, Head of Asia Research at ANZ Bank. “With one month left, year to-date outflows totalled $26.1 billion. Whatever the final amount will be, it will not be as large as the $63.4 billion of outflows seen during the 2008 GFC.” So not as severe as what was seen back in 2008, but still a significant reversal from the trend seen in every year since. Goh expects a continuation of choppy capital flows will likely continue early in the New Year.