Foreign investors plowed nearly $19 billion into emerging-market portfolios in July, snapping two months of outflows as an equity exodus slowed sharply, data from a banking trade group showed on Tuesday.
Nonresident investors added a net $18.8 billion to emerging-market debt and equities last month, after pulling a net $18 billion in June and $25.2 billion in May, according to the Institute of International Finance.
Debt continued to carry the recovery, drawing $26.7 billion in July, while equities posted a $7.8 billion outflow. The equity outflow, however, was sharply slower than the $46.1 billion withdrawn in June.
"The equity drag has faded to a fraction of its June scale,” IIF senior economist Jonathan Fortun wrote.
The data, he said, "suggests that the stress concentrated in Asian equity markets is losing intensity rather than spreading into fixed income."
While EM debt has attracted $214.4 billion through July, up from $177.7 billion in the same period last year, equities have lost $86 billion, nearly 10 times the $9 billion outflow at the same point in 2025.
Actively managed EM debt funds are also posting net inflows for the first time since 2021, according to the IIF.
ASIA BOUNCES BACK, BOND ISSUANCE AT RECORD
Asia swung to a $9.3 billion net inflow from June's $27 billion outflow, the biggest regional change. Asia's equity outflows shrank to $4.8 billion from $40.5 billion, while debt attracted $14.1 billion.
No region recorded an overall outflow, but China was an exception to the broader improvement. Foreign investors pulled $3.7 billion from its equities and $3.4 billion from debt, although equity selling also slowed sharply from June.
Strong debt demand has coincided with record government issuance. EM sovereigns sold around $19 billion in July, roughly twice the average for the month over the past decade, taking issuance this year to about $187 billion, the highest ever for the period, according to the IIF.
Debt investors have benefited from relatively high yields and subdued currency volatility, while spreads on EM sovereign bonds narrowed in July to their tightest in nearly two decades.
The IIF said tighter U.S. monetary policy, further intervention in Japan's yen and geopolitical shocks could threaten the carry trades that have helped underpin EM debt demand.
Yet the U.S. economy unexpectedly shed jobs in July, casting doubt on whether the Federal Reserve will increase interest rates next month.
