KARACHI: Emerging markets just witnessed the worst sell-off in history, one significantly larger than the global financial crisis of 2008.

Foreign investors sold $83.3bn of emerging markets stocks and bonds during March after markets woke up to risks posed by the coronavirus pandemic which began in China in January, according to the latest data published by the Institute of International Finance (IIF) on Wednesday.

“We estimate that EM securities suffered around $83.3bn in outflows during March [...] significantly larger than the one seen during the global financial crisis. This is the result of the dramatic collapse of flows across both equities and debt. While the impact of Covid-19 was first noticeable in January and then contained to China, a wider spread of the pandemic in recent weeks rattled markets,” siad IIF economist Jonathan Fortun.

Most of the outflows have been from the equities especially the Asian markets as investors fear the halt in the economic activities will affect the companies the hardest. The emerging market equities sell-off began in January but gained momentum during February with outflows reaching $13.8bn. In March, however, that number rose to $52.4bn as almost one-third of the world population was under a lockdown.

Debt outflows during the month reached $31bn -- second-highest in a month since October 2008 when the markets saw massive sell-off. Of these, outflows from emerging Asian countries were $19.5bn, Africa and Middle East $5.6bn, Latin America $4.4bn whereas those from the emerging European nations were much less at $1.5bn, data shared by the IIF with Dawn showed.

Published in Dawn, April 4th, 2020