WASHINGTON, Oct. 3 (Xinhua) -- Emerging markets will lure more than 1 trillion U.S. dollars of capital inflows from foreign investors in 2017 for the first time since 2014 thanks to stronger economic growth and increasing global risk appetite, the Institute of International Finance said in a report released on Tuesday.
"With global growth broadly based and inflation still subdued, global risk appetite has been near post-crisis highs. Moreover, growth is accelerating more quickly in emerging markets than in mature markets-typically a big pull factor for EM investors," said Hung Tran, executive managing director at the IIF.
"Driving our upward revisions for 2017 are stronger-than-anticipated portfolio debt, equity, and banking inflows. We see this continuing into next year," he added.
The IIF said non-resident capital flows to emerging markets would rise to 1.1 trillion U.S. dollars in 2017, edging up to 1.2 trillion dollars in 2018.
This marks a recovery to 4 percent of emerging market gross domestic product (GDP) from just 1.5 percent of GDP in 2015, IIF noted in the report, though that is still well below the pre-crisis peak of 9 percent of GDP.
The IIF noted that one reason for this year's rebound has been a big drop in emerging market resident capital outflows, from over 1 trillion in 2016 to an estimated 770 billion this year. Therefore, net capital flows to emerging markets have swung from large net outflows in recent years to a small net inflow.
As for China, which suffered from massive outflows in 2015 and 2016, the IIF said net capital flows to China are set to swing back to a much more balanced level this year.
"While we remain broadly constructive on EM fundamentals and valuation, flows to EMs will certainly face headwinds as the Fed continues with monetary policy tightening," said Sonja Gibbs, senior director for global capital markets at the IIF.
"If global bond yields begin to rise more quickly than anticipated-sparked perhaps by higher-than-expected inflation-it could become a much more challenging backdrop, particularly for EM debt flows," he added.
