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Emerging Asia faces capital outflow risk as Fed signals rate hike

Investors pulled $500m out of COVID-depressed markets in May

The extended lockdown in Malaysia has left the streets of its capital Kuala Lumpur deserted.   © Reuters

SINGAPORE -- Capital has started to pour out of Asian emerging markets as coronavirus outbreaks slow the region's economic recovery while investors price in the likelihood of interest rate hikes in the U.S. and Europe.

International investors sold $500 million more stocks and bonds than they bought in Asian emerging markets in May, according to the Institute of International Finance. It marks the first net outflow since December last year. When the data excludes China, whose economy bounced back quickly from its first COVID-19 crisis, the outflows jump to $10.8 billion.

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