Emerging markets were last week hit with their biggest outflows since taper talk sparked a sell-off in markets last May.
It was a move that formed part of a broader shift out of risk assets. BofA Merrill Lynch Global Research reported that equity ETF funds last week suffered their largest outflow since July 2012, after investors withdrew $12.3 billion (£7.47 billion) in a stampede to safety.
Emerging market (EM) equity funds saw their largest outflows ($6.4 billion) since August 2011.
When combined, EM debt and equity funds outflows equalled $9.1 billion, while $2.7 billion was redeemed from EM debt funds, representing the highest level since June of last year.
The sell-off can be attributed to China’s disappointing growth figures, Argentina’s decision to devalue its currency, and the likelihood that the Federal Reserve could announce further reductions to its quantitative easing (QE) programme next week.
Bank of America Merill Lynch analysts said a contrarian ‘buy’ signal could well be triggered by further EM equity outflows of $15 billion over next two to three weeks.
The broad sell-off was not far from outflows witnessed during the US debt ceiling in August 2011 and Lehman Brothers’ collapse in September 2008.