In 2024, foreign investors withdrew R$15 billion ($3 billion) from Brazil’s B3 stock market, marking a significant reversal from previous inflows.
The outflow commenced in January, with nearly R$8 billion ($1.6 billion) leaving the market, and persisted into February, with an additional R$6.89 billion ($1.378 billion) withdrawn by mid-month.
Analysts suggest capital moved to US Treasury bonds due to reevaluations of interest rate decrease timelines and robust economic data.
The rise in US interest rates significantly contributed to this trend, especially since late 2023 saw considerable investments in Brazilian stocks due to then-lower rates.
Yet, the escalation in US bond yields has now rendered these investments more appealing, diverting capital from Brazil to the US.
Some suggest capital may have moved to markets like Japan and Korea due to better prospects, avoiding emerging markets.
Emerging markets struggle with low commodity prices and China’s economic slowdown
Japan’s stock market nears its highest levels since 1990, boosted by expected Bank of Japan’s rate hike cessation.
Additionally, interest in US big tech grows due to AI boom, diverting focus from riskier emerging markets.
Capital outflows from high US rates impact Brazil and China, with optimism that Treasury rate hikes may be temporary.
Some analysts anticipate a potential shift if the Federal Reserve eases its approach.
Despite outflows, Brazilian stocks remain attractive, with attention on China’s post-New Year economic revival.
Global financial markets show interconnectivity; regional shifts affect investment globally, emphasizing global economic ties.