Storm brews in emerging markets as investors pull cash out

Foreign investors have begun to pull cash out of emerging markets as they begin to look less attractive when compared to the rising return from holding onto “safe-haven” US Treasuries.

View of Cape Town
South Africa is especially vulnerable to higher borrowing costs
(Image credit: © Getty Images/iStockphoto)

Will rising bond yields sink the emerging market rally? The MSCI Emerging Markets index soared by 90% between last March and 17 February as optimistic investors bet on a strong global upswing this year. Yet higher US Treasury yields are proving a party pooper, sending the index tumbling 9% since then.

Foreign investors have begun to pull cash out of emerging markets for the first time since October 2020, says Jonathan Wheatley in the Financial Times. The higher yields on offer in emerging markets look less attractive when investors can receive a decent return from holding onto “safe-haven” US Treasuries.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.