Glasses of Indian spiced chai tea sit at the feet of men resting in the cabin of a truck in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Capital Inflows Into Emerging Markets May See Reversal Amid Global Slowdown, Rabobank Says

Capital inflows into emerging markets will slow down and may reverse in the near future amid uncertainty surrounding the slowing Chinese economy and rising probability of recession in the U.S., Rabobank International’s emerging market Strategist Piotr Matys said.

Emerging markets tend to perform the best, when the global economy is positive, he said. “The signs of stabilisation in the Chinese economy would be positive for emerging markets, especially the markets closely co-related with China.”

The Chinese economy would, however, slow down again, Matys said, citing concerns about the U.S. economy moving towards recession by the next year. Matys expects the market sentiment to deteriorate significantly by the second half of 2019 or early 2020 to trigger outflows from the emerging markets.

Matys also said that India, specifically, should make progress on creating better economic reforms after the election to effectively fight against the negative global backdrop.

Watch the full interview here: