(Financial World) The speed of attracting gold has reached a new high. Why do emerging markets become the "sweet pastry" in the eyes of capital?

  China News Service, Beijing, November 30th (Liu Liang) Recently, the new crown vaccine research and development have successively received good news, making emerging markets a "sweet and pastry" in the eyes of international capital.

  A recent study by the International Finance Association (IIF) pointed out that the positive news of the new crown vaccine has strongly boosted global demand and attracted investors to turn to emerging economies.

According to IIF research data, the recent flow of non-resident portfolios to emerging markets has hit a new high since the second quarter of 2014.

  IIF pointed out that at the beginning of this year, due to the impact of the epidemic, a large amount of capital outflows occurred in emerging markets. In March alone, nearly $90 billion of investment funds flowed out of emerging markets, and in the following months, capital flowed into emerging markets. Obviously weak.

  "The positive news of the new crown vaccine has strongly boosted global demand. Capital outflows from emerging markets are now a thing of the past, and strong capital inflows are expected to continue." IIF chief economist Robin Brooks and economist Jonathan Fortun wrote in the report Tao.

  According to IIF data, if December can maintain the growth rate since October this year, the net issuance of emerging market bonds in the fourth quarter is expected to reach the highest level in history.

  IIF's observations on the flow of international capital coincide with the recent views that international financial institutions are optimistic about emerging markets.

  Goldman Sachs Group pointed out that the global economy began to recover since the second quarter, and the performance of emerging markets is expected to exceed the rest of the world.

In addition, in this month's Bank of America survey, one-half of fund managers also regard emerging markets as their first choice for investment in 2021.

  Morgan Stanley said that after the US election, the focus of the market has turned to vaccine trading.

"If effective vaccines can be distributed, emerging markets will participate more fully in the recovery of the global economy."

  Chen Fengying, a researcher at the China Institute of Modern International Relations, said in an interview that the "return" of international capital to emerging markets is also closely related to the trend of the US dollar.

She pointed out that in early March of this year, against the background of the outbreak of the epidemic and the "dollar shortage", the liquidity of the US dollar was substantially tightened, and the short-term strength of the US dollar led to a temporary increase in the pressure of capital outflow.

  Chen Fengying pointed out that since May, with the implementation of unlimited quantitative easing in the United States, the dollar index has fallen, and capital flows seeking higher returns have stimulated capital flows to emerging markets to a certain extent.

In addition, the implementation of low interest rate policies in developed countries such as the United States and Europe has also made international capital relatively more favored by emerging markets.

  Wall Street economists also pointed out that a weaker U.S. dollar is critical to the investment prospects of emerging markets.

Some analysts predict that the exchange rate of the U.S. dollar against the currencies of major trading partners will fall by 20% next year, which will provide strong support for assets in emerging markets.

Because the weaker U.S. dollar means that the local currency has room for appreciation, which will help emerging markets reduce the pressure on repaying U.S. dollar loans.

  But it should be pointed out that the return of capital does not mean that emerging markets have bright prospects.

Chen Fengying said that he needs to be cautiously optimistic about future capital flows in emerging markets.

She said that the good news about vaccines has limited attraction for capital in emerging markets.

On the one hand, due to the impact of the epidemic, some emerging economies still have heavy debt pressure; on the other hand, if the Fed’s monetary easing shrinks and the U.S. dollar index strengthens, the upward momentum of investment in risk assets may be suppressed, and the rate of capital flow to emerging markets will also be suppressed. Relatively slow down.

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