Emerging Markets See $24 Billion Outflow As Investors Shift To Developed Economies

Global funds pulled out $24.4 billion from emerging markets over the last 15 weeks as investors reduced exposure to risk-sensitive assets amid rising oil prices and tensions linked to the Iran conflict, according to a report by Elara Capital.

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The report showed that China-focused funds accounted for nearly $22 billion of the total outflows during the period. Meanwhile, developed markets saw strong inflows, consistent with a move to assets considered safer during periods of geopolitical uncertainty.

Developed market funds received $46 billion in inflows over the past eight weeks. Of this, U.S. markets accounted for $23 billion, marking the highest inflow level recorded in five weeks. Globally mandated funds also received a record allocation of $20.2 billion during the same period, according to the brokerage.

Crude Oil Surge Triggers Risk-Off Sentiment

Elara Capital stated that elevated crude oil prices and geopolitical uncertainty have accelerated defensive positioning across global portfolios. The report noted that the rise in energy prices has weakened investor appetite for cyclical and growth-linked sectors within emerging markets.

Global emerging market funds recorded outflows of $2.6 billion over the last nine weeks. This implies moderation in the positive momentum that was supporting assets in the emerging markets from June 2025 to February 2026.

The fears about commodities and increased volatility have also been felt in investments focused on technology in emerging countries. The technology funds in emerging markets have seen outflows of $16 billion in the last five weeks.

The report said that the AI-driven investment cycle in Taiwan and South Korea is beginning to lose steam despite significant flows since May 2025. Flow momentum in both markets weakened during recent weeks as investors reduced exposure to higher-risk assets.

India Sees Slower Pace Of Outflows

India recorded comparatively lower outflows than several other emerging markets during the latest reporting period. Weekly outflows from Indian markets slowed to $274 million, according to Elara Capital.

India-focused funds also ended an 11-week redemption cycle that had resulted in cumulative outflows of nearly $6 billion since February 2020. Despite the moderation in withdrawals, the report said active foreign inflows into Indian equities remain limited.

Pressure in India continued mainly within long-only investment strategies, which saw outflows of $246 million last week. However, exchange-traded fund inflows from U.S. investors partially offset these withdrawals.

Passive Flows Continue To Support Indian Equities

According to the report, passive equity investments continue to be the dominant driver of foreign funding into Indian stocks. Foreign inflows through ETFs have been observed despite the absence of any active involvement from foreign players.

In the recent past, foreign investments have been on the rise into developed economies due to the fear of oil price volatility, rising inflation, and political uncertainties. However, foreign investments in emerging markets remain subject to the vagaries of commodity prices and risks.