Investor stampede out of emerging markets, gold continues

The stampede out of emerging markets and commodities continued last week as investors dumped yet more billions of dollars worth of assets sensitive to higher U.S. interest rates and worries over China, Bank of America Merrill Lynch said on Friday.

A net $4.5 billion left emerging market equity funds in the week to July 29, bringing the total outflow over the past three weeks to $15 billion, BAML said in its report, which also cited the latest weekly flow figures from data-provider EPFR Global.

“Submerging Markets” was how BAML referred to emerging markets.

Gold and precious metals funds posted an outflow of $1.2 billion, the largest weekly outflow since December 2013. Chinese equity funds posted a net outflow of $1.6 billion, while Asian stock funds ex-Japan lost almost $3 billion, EPFR said.

So far this year investors have pulled $26.6 billion from emerging market equity funds. In that time, they have ploughed a net $60.4 billion into developed market equity funds, all of which has left the United States for Europe, Japan and elsewhere.

Copper prices hit a six-year low this week, while Chinese stocks have plunged 14.3 percent in July, their biggest monthly fall since August 2009.

As China wobbled and the Federal Reserve paved the way for a U.S. interest rate rise later this year, the pressure on emerging economies showed no sign of letting up this week.

Brazil’s real hit a 12-year low and South Africa’s rand a 13-1/2 year low against the dollar, forcing central banks in both countries to raise rates, which could have serious implications for growth.

Brazil is already in recession and had its ratings outlook revised downwards by Standard & Poor’s this week.