Emerging-market investment flows turn positive in July

Foreign investors returned to emerging-market portfolios in July, contributing nearly $19 billion in net inflows. This marks a reversal from two months of outflows in May and June, according to data from the Institute of International Finance (IIF). The recovery was primarily driven by debt, which saw $26.7 billion in inflows, while equities experienced a $7.8 billion outflow—a significant slowdown from the $46.1 billion withdrawn in June.

Regionally, Asia saw a notable shift, moving to a $9.3 billion net inflow. While equity outflows in Asia shrank significantly, China remained an outlier, with investors pulling $3.7 billion from its equities and $3.4 billion from its debt.

On a broader global scale, while international equities have outperformed U.S. stocks year-to-date, the performance gap is narrowing. Data from various ETFs suggests that the momentum of foreign equities may be peaking as U.S. markets regain strength, potentially signaling a return to the long-term trend of international stocks underperforming American shares.