The massive pullback in October was overwhelmingly led by equity markets, which surrendered $31.7 billion compared to $2.1 billion drawn from debt portfolios. Emerging Asia bore the brunt of the flight, enduring $28.7 billion in net exits primarily fueled by heavy selling in Taiwan and South Korea. Meanwhile, China experienced its largest monthly debt outflow since May as foreign investors pulled $9.3 billion. Although recent U.S. political outcomes may ease Treasury yields, an impending 25-basis-point Federal Reserve rate hike threatens to prolong broader market volatility.
Key points
Disappointment and profit-taking in artificial intelligence investments triggered intense…: Disappointment and profit-taking in artificial intelligence investments triggered intense selling pressure across Asian technology shares.
Election-related uncertainty in Brazil helped drive $1.7 billion in net regional outflows…: Election-related uncertainty in Brazil helped drive $1.7 billion in net regional outflows from Latin America.
Non-China debt markets may attract capital if 10-year Treasury yields stay below the Octo…: Non-China debt markets may attract capital if 10-year Treasury yields stay below the October peak of 5.30 percent.
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The outflow compares with a revised $19.3 billion net outflow in September and a $27.4 billion inflow in October last year, according to IIF data.
Equities accounted for nearly all of October's total, with net outflows of $31.7 billion, including nearly $32 billion out of Taiwan. Debt saw a net outflow of $2.1 billion, as $7.2 billion of inflows into bonds outside China partly offset a $9.3 billion outflow from Chinese debt, the largest since May.
Tuesday's US midterm election results have reinforced expectations of lower Treasury yields and a weaker dollar, potentially reducing borrowing costs and easing pressure on emerging market currencies.
"The (October) outflows came alongside lower US yields and a broadly stable dollar, which we read as a sign that equity risk appetite and country specific shocks were the main sources of pressure over the month," IIF senior economist Jonathan Fortun wrote in a report.
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