EMs show resilience in face of rising interest rates, stronger USD: Net capital inflows into emerging markets excluding China rose to USD 110 bn, or 0.6% of GDP in 2023, their highest level since 2018, the International Monetary Fund said in a blog post. The recovery from post-pandemic lows comes despite monetary tightening by the US Federal Reserve and a stronger greenback.

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The breakdown: EM saw a decline in more volatile net portfolio inflows, but net inflows of foreign direct investment (FDI) remained resilient, the IMF said. The Washington-based lender partly attributed EM resilience to “stronger fundamentals. … Indeed, many countries are now benefiting from more robust fiscal, monetary, and financial policy frameworks, as well as more effective implementation of policies and tools,” it said.

Negatives for China: China saw net capital outflows, including net FDI outflows over 2022-2023, the IMF said. “Some of this may reflect multinational firms repatriating earnings. But it may also reflect shifting expectations about Chinese growth and geoeconomic fragmentation,” the IMF said.

Zooming out:

  • Global gross inflows fell to USD 4.4 trn (or 4.4%) of the world’s GDP during 2022-2023, down from USD 4.5 trn (or 5.8%) of global GDP in 2017-2019, according to the IMF.
  • The US saw its share of global gross inflows almost double to 41% during 2022-2023 from 23% in 2017-2019. Its share of global gross outflows also increased to 21% from 14%.

ALSO- A breather for Islamabad: The IMF reached a staff-level agreement with Pakistan on a USD 7 bn loan for the cash-strapped South Asian country, according to an IMF statement. The 37-month extended fund facility will still need to be signed off by the fund’s executive board (usually a formality) before the funds are disbursed. The facility comes as Pakistan struggles to meet some USD 24 bn in loan repayments due this fiscal year, according to Bloomberg.

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THE CLOSING BELL-

The EGX30 fell 0.6% at Thursday’s close on turnover of EGP 3.3 bn (22.2% below the 90-day average). Regional investors were the sole net buyers. The index is up 13.6% YTD.

In the green: Beltone Holding (+4.1%), Oriental Weavers (+2.4%), and Egypt Kuwait Holding (+1.7%).

In the red: Ezz Steel (-5.1%), GB Corp (-4.0%), and E-finance (-2.9%).

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