China-eyed foreign investors react as US’ ‘renewed hawkish’ monetary stance spills into emerging markets
- Overall flow of funds from foreign investors into emerging-market securities slowed in February
- Analysts say monetary-policy uncertainty may boost demand for US dollar protection
Foreign investors poured more cash into emerging-market securities in February, but the pace could slow as the hawkish monetary stances of the US Federal Reserve and European Central Bank serve as stiff headwinds, according to a US-based association of the world’s largest financial institutions.
The Institute of International Finance (IIF) on Thursday estimated that emerging-market securities attracted around US$22.9 billion worth of foreign funds in February. In Chinese stocks, foreigners invested a total of US$2.4 billion last month, the IIF said.
The overall flow of funds from foreign investors into emerging-market securities slowed from January, when such securities attracted US$65.7 billion, according to data from the IIF. Foreign funds also snapped up US$17.6 billion worth of Chinese equities in January.
“In the near future, we see the level of inflows lowering – the product of a more cautious market, given the still-hawkish monetary stance from the [US Federal Reserve] and [European Central Bank],” the IIF said, adding that the “renewed hawkish” sentiment of the US Federal Reserve is spilling over into emerging markets.