Bonds, Currencies, Emerging Markets, Stocks

Emerging Markets Saw The Largest Outflow Since Q2 2009 Amid China Market Crash, JPMorgan Says

emerging marketsCapital outflows from emerging market countries reached $120 billion in the second quarter of this year — the most since 2009 — led by an exodus from China’s markets during the country’s recent stock market crash, according to JP Morgan, Bloomberg reports.

During the first quarter of this year capital flows into emerging markets rose $80 billion, according to JP Morgan. However, a sharp reversal was seen in the second quarter where international investors pulled $142 billion from Chinese equities between April and June, which extended the total outflow from the world’s second-largest economy over the past five quarters to $520 billion, according to the firm, and thus wiped out all the inflows since 2011.

In China, stocks were surging over the past 12 months as the Shanghai Composite Index spiked 152 percent and reached a 52-week high through June 12, and the market cap of Chinese stocks rose above $10 trillion for the first time ever.

However, Chinese stocks sharply changed direction and fell into a bear market in late June and continued crashing as the Shenzhen Composite Index fell 40 percent through the peak crash.

As markets in China plunged, government officials quickly rushed in with daily urgent measures implemented in an effort to stem the crash, however markets just continued to plunge.

As markets continued to fall, Chinese companies rapidly suspended trading, one after another, until there were trillions of dollars frozen from trade.

According to Bloomberg, on July 7, nearly 75 percent of traders were frozen from selling their shares of Chinese stocks during the crash.

When all was said and done in China, there was nearly $4 trillion dollars wiped out from the Chinese market.

Chinese markets have since then recovered, however the threat of a further selloff is present, most notably with the likelihood of the U.S. Fed hiking interest rates later this year, which could further jeopardize not only Chinese markets, but the entire realm of the emerging market stock exchanges.

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