JPMorgan: Romania at High Risk of Capital Flow “Sudden Stop”

    Emerging markets could witness a feared “sudden stop” in capital flows as President Donald Trump’s “America First” policies stimulate the US economy and siphon money from poorer countries, investment bank JPMorgan warned on Thursday, listing Romania, along with three other states, among the countries most at risk, Reuters reports. Analysts fear sudden stops in capital flows as they deprive economies of the money they need to grow or even continue to operate.   JPMorgan’s internal guidance shows that there were $19 billion in “net capital outflows” from emerging economies, excluding China, in the last quarter of 2024, and another $10 billion is expected to flow out in the first quarter of 2025. “Simply put, using the widely accepted academic definition, this would signal that EM ex China is heading for a sudden stop,” the bank said in a research note, adding that the phenomenon is not something “to be taken lightly.”   The current slowdown in capital flows is not driven by an EM-centric event, but rather by tightening global financial conditions as tariffs and Donald Trump’s tax cut promises increase the likelihood that US interest rates will remain higher for longer. Given this, “this is not a situation where individual EM countries are under pressure and facing balance of payments or currency pressures, as was the case in 1998-2002, 2013, 2015,” JPMorgan added.   It is also not a case of weakness in the US economy prompting a global “risk-off” sell-off. “Rather, it is a case of a strong US economy and political risks attracting flows from foreign markets,” JPMorgan analysts say.   How the situation will evolve from now on will depend on what Trump does and whether key US data on jobs, inflation and retail sales prove strong enough to trigger interest rate moves from the Fed, says JPMorgan. Even if a sudden stop occurs in EM, most economies should be able to absorb this shock.   The most exposed to risk are Romania, Malaysia, South Africa and Hungary, JPMorgan estimates.   JPMorgan Chase & Co. (aka JPMorganChase) is an American multinational financial services firm headquartered in New York City and incorporated in Delaware. It is the largest bank in the United States and the world’s largest bank by market capitalization as of 2023.