Five years of capital left emerging markets in a year
by Daily Sabah
ISTANBULAug 20, 2015 - 12:00 am GMT+3
by Daily Sabah
Aug 20, 2015 12:00 am
The capital outflow from 19 leading emerging markets has amounted to $940 billion over the past 13 months, according to NN Investment Partners asset management company. The capital outflow almost doubled when compared to the period following the 2008 financial crisis. A net capital of $2 trillion flowed into emerging markets between 2009 and 2014. The latest data showed that half of the capital that flowed in the five-year period left developing countries in only 13 months.
One of the main reasons for the capital outflow from developing countries is the fact that the U.S. Federal Reserve is heading toward an interest rate hike. It is also said that China's recent devaluation of the yuan has accelerated this process. Furthermore, the rise of political uncertainty in Turkey, Russia, Brazil and Malaysia leads to a further weakening of confidence in developing countries. Although they had supported global growth until recently, developing countries have started to have a decreasing impact on demand. Although growth in developed countries has started to gain momentum, it does not seem possible for them to catch up with developing countries in supporting the growth. NN Investment Partners Strategist Marteen-Jan Bakkum said there is a long way to go regarding capital outflow. Societe Generale strategist Berbd Berg said the currencies of developing countries are facing their worst storm yet at the moment.