Foreign investors pull $26.6 billion from emerging markets in May

Thursday 11 June 2026 - 09:19

By: Dakir Madiha

Foreign investors pull $26.6 billion from emerging markets in May

Foreign investors withdrew a net 26.6 billion dollars from emerging market portfolios in May, reversing the rebound seen in April and underscoring renewed volatility in global capital flows. Equity sales in Asia drove most of the outflows, outweighing more stable demand in emerging market debt.

The shift follows a highly unstable sequence of monthly flows. Investors injected 70.6 billion dollars into emerging markets in April after pulling out 70.3 billion dollars in March, the largest monthly outflow since the pandemic shock of March 2020. January recorded strong inflows of 100.5 billion dollars, followed by a slowdown to 21.7 billion dollars in February, before the sharp March reversal and April rebound.

Equities accounted for most of the May retreat. Foreign investors sold 37 billion dollars in emerging market equities during the month. Asia emerged as the center of pressure, recording 31.6 billion dollars in net portfolio outflows, with selling concentrated outside China. India alone saw more than 20 billion dollars in equity outflows over the first four months of the year, setting a record pace of withdrawals.

Despite persistent selling, emerging markets continued to outperform developed markets on a year-to-date basis. The MSCI emerging markets index gained around 19 percent, compared with a 7.9 percent rise in the S&P 500. Over a longer horizon, emerging market equities rose 33.6 percent in 2025 versus 17 percent for US equities, highlighting a gap between performance and investor positioning.

Debt markets provided partial stability. Bond inflows helped offset equity outflows in May, limiting the overall damage to portfolios. Market participants linked the divergence to shifting expectations around inflation, a softer dollar, and renewed demand for non-dollar assets, even as geopolitical risk and macroeconomic uncertainty continued to trigger abrupt reallocations.