In this report, we provide an update of our EM Flow Indicator, a tool to track flows into emerging markets that combines normalized weekly flow data from two sources – IIF and EPFR – and incorporates both local currency debt and equity flows. We also update our complementary EM Risk Monitor, which is a multi-dimensional, EM-specific measure of risk sentiment.    Summary of results: The EM Flow Indicator shows that inflows slowed markedly last week, driven by higher core rates following hawkish central banker comments at the Sintra conference. After being in positive territory through the first half of 2017, EM flows turned flat, though we have not seen significant outflows yet. The EM Risk Monitor moved from risk positive to risk neutral territory, a reflection of the deterioration in risk sentiment over the past 1-2 weeks.    The EM Flow Indicator (chart below) has moved to flat (zero), indicating the inflows – which were strong through H1 2017 – slowed over the past week. This was driven by higher core rates following hawkish central banker comments at the Sintra conference. The latest weekly signal (covering data up to 5th July) is +0.07, which essentially implies no inflows, a marked slowdown from the 0.5+ readings observed through most of this year. The indicator captures flows normalized by the standard deviation, with values greater than +0.5 indicating significant inflows and values less than -0.5 indicating significant outflows. It is worth noting that while EM inflows have slowed, they have not turned into outflows. This provides an indication that sentiment around EM has not yet structurally and completely capitulated; therefore, if core real rates (particularly in the US) stabilize, EM inflows could return.

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