It's Stunning How Aggressively Investors Dumped Emerging Market Bonds This Week

It’s almost unbelievable how rapidly investors are yanking their money out of the Emerging Markets.

The sucking sounds particularly loud in the EM debt markets.

“Emerging Markets debt-dedicated funds recorded net outflows of $5,578MM (2.19% AUM) for the week ending on June 26, 2013, reports EPFR,” said Morgan Stanley’s Robert Habib. “This is the largest outflows ever recorded by EPFR from EM-dedicated funds, twice as large as last week’s $2.6bn outflow. This is also a third of the net inflows into EM-dedicated funds year-to-date.”

The numbers are breath-taking.

And this is troubling as these developing economies are at risk of a sudden stop —the nightmare scenario where a country effectively gets shut out of the global credit markets.

Earlier today, bond god Jeff Gundlach recommended investing in the emerging markets as a contrarian idea.

Here’s a geographic breakdown:

emerging market flows

This chart offers some historical context to the magnitude of the outflow.

emerging market fund flows

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