EM Capital Flows Monitor: Dusting off the capital flows manual

Research evidence excerpt

EM Capital Flows Monitor: Dusting off the capital flows manual

J P M O R G A N Latin America Economic Research

29 July 2026

EM Capital Flows Monitor

Dusting off the capital flows manual

• Capital flows analysis is, first and foremost, a macroeconomic exercise Emerging Markets Economic and

and should be analyzed as the sum of its parts. Policy Research

• While portfolio inflows are an important driver of net flows... Katherine Marney (1-212) 834-2285

• Narrower CADs, the changing composition of inflows and the rise of local katherine.v.marney@jpmorgan.com

investors also matter for the story. J.P. Morgan Securities LLC

• More recently, pockets of equity stress are masking otherwise steady

capital flows into EMX.

Often, in EM lingo, capital flows is taken as a shorthand for foreign portfolio inflows.

This point of view stems from an analytical framework when the behavior of foreign

debt and equity investors into EM was the main source of financial flows and funding

source for current account balances. That is, foreign portfolio flows drove net capital

flows that determined whether a country’s current account was sufficiently financed

or not.

Some of the most widely used data sets, such as EPFR fund flows, or non-resident debt

or equity flows to EM are used as a proxy for portfolio flows for that purpose. These

data sets are very valuable, for example, in tracking flows or market technicals across

different types of assets or investors, and also on a daily/weekly basis. Yet, due to

methodological limitations and focus, they are inherently narrow as a subset (fund

flows) of a subset (foreign portfolio) of capital flows. The literature shows a weak

correlation at the EM level and by specific countries between EPFR flows and overall

BOP portfolio flows.