NEW YORK (Reuters) - Emerging markets debt and stock portfolios drew in $43.4 billion from foreign investors in November, the largest net amount since January, even as China posted another month of net outflows, data from the Institute of International Finance show.
Expectations of a peak in monetary policy tightening in developed economies was seen as a sign rates will come down globally, feeding into the frenzy, with the November figure comparing to an outflow of $3.5 billion in October and inflows of $41.9 billion in November 2022.
"Emerging market local debt returns are gaining momentum, with the asset class poised for its best performance since 2019," IIF economist Jonathan Fortun said in a statement.
He added that the strong performance of EMs outside of China "is mainly explained by a more benign view on inflation across the market as well as the prospects of reduced rates in coming months."
That view may have hit a hurdle, however, following Tuesday's news that U.S. consumer prices unexpectedly edged back up in November. Traders now see May as the time when the Federal Reserve could begin to lower rates, with March having been favored as recently as last week.
Markets continue to price in a full percentage point of cuts in the Fed's benchmark rate through 2024.
Equity flows showed a $14.8 billion inflow in November following three months of outflows, while debt portfolios attracted $28.6 billion, the most since July 2021.
Flows to equities in EM ex-China ballooned to $14.2 billion, the highest in a year, while the $32.9 billion inflow into ex-China debt was the highest since October 2022.
Chinese equities saw a 0.6 billion inflow last month but the $4.3 billion outflow in debt made for the ninth net monthly outflow from China this year, the data showed.
Year-to-date estimates through November show a net $78.1 billion outflow from China, while emerging markets ex-China have seen $214.7 billion in net non-resident portfolio inflows.
"We see EM x/China debt and equities recovering from the outflow episode of the last three months," said Fortun. "This marks a clear bifurcation between China and the rest of EMs, suggesting a change in sentiment from investors."
(Reporting by Rodrigo Campos, Editing by Nick Zieminski and Chizu Nomiyama)