Trump Tantrum in emerging markets prompts $24bn exodus

Added 1st December 2016

Foreign investors took their money out of EM assets at the fastest pace since the 2013 Taper Tantrum in November, according to the Institute of International Finance (IIF).

Trump Tantrum in emerging markets prompts $24bn exodus

The organisation estimates net outflows to have reached $24.2bn (€22.9bn) over the month, with EM debt funds accounting for about two thirds of those. The figures confirm Donald Trump’s election indeed threatens to be a game-changer for emerging markets. The November outflows have put an end to a four-month string of net inflows into emerging market equities and debt. From July to October, European investors alone had been investing a net sum of €41.5bn in EM assets, with the majority of flows going into EM debt funds.

 

Emerging Asia, with net outflows of $15.9bn, was the region hardest hit by the ‘Trump Tantrum’, as investors fear the region will be affected by possible protectionist measures by the incoming Trump administration, as well as a more hawkish Fed. Net outflows from Latin American were more modest, but also relatively sizeable at $2.4bn.

Watch the Fed

According to the IIF, an increase in Fed rate rise expectations (which is for a large part a consequence of the inflationary effects of some of Trump’s presumed policies) remains the largest explanatory factor for the outflows, just as was the case during 2013’s Taper Tantrum.

 

“Our behavioural model indicates that rising Fed policy expectations made a negative contribution of over $13 billion [to outflows] this month,” the IIF said. “Domestic factors were also a driver, perhaps including heightened concerns about the EM growth outlook given a less-friendly backdrop for global trade and EM exporters.

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Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.

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