Evergrande worries hit China debt but foreign EM flows rise in Sept – IIF

NEW YORK, Oct 4 (Reuters) – Chinese debt saw the largest outflows in six months in September on volatility triggered by the China Evergrande Group crisis, but high debt issuance across emerging markets helped push overall foreign inflows to their highest levels since June.

Emerging market securities pulled in $29.8 billion from foreign accounts last month, according to data from the Institute of International Finance that also showed the largest outflow from Chinese debt since March.

Debt securities accounted for a net $26.2 billion of flows into EM last month as $34.3 billion made its way to destinations outside China, while Chinese debt posted an $8.1 billion outflow.

“The high level of EM hard currency sovereign bond issuance during September (of around $24 billion) helped to lift the overall performance for flows,” Jonathan Fortun, an IIF economist, said in a note.

Chinese equities took in $1.4 billion from foreign investors last month, while the rest of EM received another $2.2 billion. The Chinese figure was the smallest since March, and compares to an average monthly inflow of $7 billion over the past 12 months, IIF data showed.

The hesitancy toward Chinese markets is partly explained by concerns that property developer Evergrande’s liabilities of more than $300 billion could spread through the Chinese economy.

Compounding worries, Chinese homebuilder Fantasia Holdings Group on Monday missed a $206 million debt repayment deadline, in a sign that distress is spreading through the real estate sector.

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