Foreign investors added a net $18.8 billion to emerging-market portfolios in July, ending two straight months of outflows as selling in equities eased sharply and debt demand stayed strong, according to Institute of International Finance data. Emerging-market debt attracted $26.7 billion in the month, while equities still saw a $7.8 billion outflow, though that was far smaller than June’s $46.1 billion withdrawal. IIF senior economist Jonathan Fortun said the pullback in equities had faded to a fraction of its June scale, suggesting pressure centered on Asian stock markets was easing rather than spilling into fixed income. The split between stocks and bonds has been driven this year by a retreat from tech-heavy shares in Korea and Taiwan. Through July, EM debt has drawn $214.4 billion versus $177.7 billion in the same period last year, while equities have lost $86 billion, almost 10 times the $9 billion outflow recorded at the same point in 2025. Asia posted the largest turnaround, shifting to a $9.3 billion net inflow from a $27 billion outflow in June. China, however, bucked the broader improvement as foreign investors withdrew $3.7 billion from equities and $3.4 billion from debt. The IIF said strong debt demand has coincided with record sovereign issuance (government bond sales), with EM sovereigns raising about $187 billion so far this year, the highest ever for the period. It warned that tighter U.S. monetary policy, further intervention in Japan’s yen and geopolitical shocks could threaten carry trades (borrowing in low-yield currencies to buy higher-yielding assets) that have supported EM debt demand, although weaker-than-expected U.S. jobs data in July has raised doubts about another Federal Reserve rate increase next month.