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Emerging Markets Set for First Annual Net Outflow in 27 Years

  • Brazil, Turkey most at risk amid weak FX, political turmoil
  • No catalyst for investors to reenter EM as risks remain high

Capital outflows from emerging markets are on track to exceed inflows this year for the first time since 1988 amid concern that a slowdown in China, a currency selloff and higher interest rates in the U.S. will make riskier assets less attractive.

Investors are estimated to pull $540 billion from developing markets in 2015, according to the Institute of International Finance based on data for 30 nations. Foreign inflows will fall to $548 billion, about half of last year’s level and below the amounts recorded during the financial crisis in 2008. At the same time, local outflows are accelerating amid heightened market volatility, pushing net flows into negative territory.