Emerging markets lose $33.8 billion in October as investors flee Asian stocks

Foreign investors pulled a net $33.8 billion out of emerging markets in October, marking the biggest monthly outflow since March, as concerns over technology stocks and country specific risks prompted investors to cut exposure to the asset class, Reuters reported, citing data from the Institute of International Finance (IIF). However, easing US bond yields and a weaker dollar following the US midterm elections could provide some relief to emerging economies.

The latest outflow was significantly higher than the revised $19.3 billion withdrawn in September. Emerging markets had attracted $27.4 billion in October last year, according to IIF data cited by Reuters.

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Equities accounted for almost the entire outflow, with investors withdrawing a net $31.7 billion. Debt markets recorded outflows of $2.1 billion, as fresh investments in bonds outside China partly offset withdrawals from Chinese debt.

Taiwan and South Korea bear the brunt of equity selloff

Emerging Asia accounted for $28.7 billion of October’s total outflows, with Taiwan and South Korea among the worst hit markets as investors booked profits following strong gains earlier in the year.

Foreign investors pulled $31.8 billion from Taiwanese stocks, the largest monthly withdrawal in IIF data dating back to 2000. South Korean equities saw outflows of $14.6 billion, Reuters reported. Also Read: Nasdaq tumbles over 3% as tech stocks extend selloff after Democrats sweep midterms; Tesla plunges 9%, chipmakers slide

The selloff came despite upward revisions to earnings estimates for both markets, suggesting investors were reducing sizeable positions after a strong rally. Taiwan’s benchmark index had gained 66% in the first nine months of 2026, while South Korea’s rose 62%.

China also continued to face foreign investor withdrawals, with equities recording $5 billion in outflows for the fifth consecutive month. Chinese debt saw withdrawals of $9.3 billion, its biggest since May, according to the IIF.

US midterm results could ease pressure

Despite the October selloff, the IIF sees potential support for emerging markets from a softer US dollar and lower Treasury yields. The US midterm election results have strengthened expectations of easing financial conditions, which could reduce borrowing costs and currency pressures for developing economies.

“The (October) outflows came alongside lower US yields and a broadly stable dollar, which we read as a sign that equity risk appetite and country specific shocks were the main sources of pressure over the month,” IIF senior economist Jonathan Fortun wrote in a report.

However, concerns around the profitability of artificial intelligence investments and expectations of a Federal Reserve rate hike next month could keep Asian technology stocks under pressure, the IIF said.

Emerging market equity outflows have reached $127.4 billion so far in 2026, compared with $18.5 billion a year earlier. Total net inflows into emerging markets stand at $135.9 billion, against $254 billion in 2025, Reuters reported, citing IIF data.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)