In this environment overwhelmed by the coronavirus pandemic, the emerging markets of Latin America experienced a strong capital flight
In a context marked by growing concern about the coronavirus pandemic, March brought an outflow of record asset class flows.
These data, which arise from a report by the Institute of International Finance, establish that last month, net outflows of emerging assets were recorded for a record total of $ 83.3 billion, in what the entity describes as a “dramatic collapse of flows both in stock markets and fixed income”.
This far exceeds the capital outflow recorded in other episodes of international risk aversion, such as the devaluation of the Chinese market in 2015 and the turbulence known as “taper tantrum” in 2014. Furthermore, it also overcomes the financial crisis of 2008 .
“While the impact of the covid-19 was first noticed in January and was contained in China at the time, a larger expansion of the pandemic in recent weeks shook markets, creating a shock to emerging markets more severe than that of the financial crisis, at the flow level, “the report highlighted.
The first quarter of 2020 had an output of US $ 62 billion, almost double what was recorded in 2008 and 2009. And despite being the epicenter of the pandemic, the bulk of capital flight comes from other countries in the category, according to the entity.
While the IIF notes that the steps the United States Federal Reserve has taken to mitigate the impact of the pandemic could help the emerging segment, a change in investor concerns would lead to more outflows.
“Markets so far have been concerned about the economic consequences of covid-19 in developed economies. This focus could be shifting to emerging markets, which could trigger a second wave of outflows, even after record leaks from the first quarter, “the firm warned in a recent report.
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