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Inflows to emerging markets stall in fourth quarter — IIF

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NEW YORK — The pace of fund flows to emerging markets has stalled in the fourth quarter, data from a bank lobbying institution show, with fund flows to Mexico slumping to their lowest since 2011 and accounting for just 3.8% of investors’ portfolios.

The Institute of International Finance (IIF) on Friday released a survey that found emerging market flow has dampened significantly as investors have pulled back on allocation to the asset class, preferring to invest in US assets as tax overhaul expectations have heightened. For Mexico, IIF said protracted negotiations on the North American Free Trade Agreement have weighed on sentiment as the administration of US President Donald Trump has drawn a hard line that investors see as dimming the likelihood of a renewed agreement.

Emerging market assets have had inflows of about $14 billion since late September, the group said, noting that “the pace of inflows has slowed and has become more volatile — in line with trends in daily cross-border portfolio flows.”

IIF also noted expectations of a December interest rate increase from the Federal Reserve, uncertainty about US tax policies and profit taking after strong gains this year as having contributed to the slowdown.

Investors told Reuters, however, that the slowdown was largely the result of cyclical trends, as emerging market buying regularly slows in the later months of the year.

“It’s practiced within our industry to take profits in the fourth quarter,” said Jan Dehn, head of research at Ashmore Investment Management. “That’s very restricted to this quarter.”

Mr. Dehn expects buying to pick up again once the new year begins in January.

Last month the organization reported that foreign investors had cut capital flows to emerging market debt and equities in September for the second straight month, reducing inflows to $14.5 billion.

That estimate marked the lowest level of inflows since January’s $13.2-billion reading and was a little more than $1 billion lower than August’s level. — Reuters

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