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Investors have pulled near $1 trillion from emerging markets

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A surge of capital gushing out of emerging markets has risen toward $1 trillion over the past 13 months, roughly double the amount that fled during the financial crisis amid slumping confidence in the world's developing economies.

The sustained exodus of capital reinforces concerns that emerging market economies, suffering slowing growth and weakening currencies, are relinquishing their longstanding role as locomotives for global growth to become a drag on demand instead.

Analysts say the flow may accelerate following China's currency devaluation this month and nervousness over an expected rate hike by the US Federal Reserve.

"These outflows have much further to go," said Maarten-Jan Bakkum, senior emerging market strategist at NN Investment Partners. Capital outflows result when investors, corporations, financial institutions and others move their money offshore, thereby applying downward pressure on the country's currency.

Total net capital outflows from the 19 largest emerging market economies reached $940.2 billion in the 13 months to the end of July, almost double the net $480 billion that flowed out during three quarters during the 2008/09 financial crisis, according to a compilation of official data and estimates by NN Investment Partners, an investment bank.

The outflows mark a sharp reversal from the robust infusion of funds emerging markets received in the six years following the crisis as they helped invigorate a feeble global economy. From July 2009 to the end of June last year, a net $2 trillion in capital flowed into the 19 emerging markets, NN Investment Partners found.

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But as the funds cascade out, a vicious circle is triggered. Currencies tumble against the US dollar, damping demand for imports and driving down aggregate demand. In June, for example, overall emerging market imports were 13.2 percent lower year-on-year, according a moving average compiled by Capital Economics.

"The collapse in emerging market imports reflects a more fundamental drop in demand as capital outflows have forced domestic demand to shrink and lower commodity prices have eroded incomes in commodity-producing countries," said Neil Shearing of Capital Economics. "So far, there is little sign that we have reached the bottom."

Emerging market currencies again came under strain on Tuesday as traders judged that China's devaluation of the renminbi this month had removed a rare anchor of currency market stability. In addition, 6.1 percent and 6.6 percent falls in the main indices of the Shanghai and Shenzhen stock markets respectively undermined confidence in Beijing's ability to reinvigorate economic growth.

Read MoreWhat China's yuan move means for emerging markets

"Emerging market currencies are currently facing the worst of all storms," said Bernd Berg, strategist at Société Générale. "Global growth fears [are] driven mainly by a significant slowdown in emerging market countries, while the lukewarm recovery in developed nations is not strong enough to counteract weakness in China and other emerging countries," he added.

The expectation that the Fed may raise interest rates this autumn is underpinning the US dollar's strength against developing country currencies, while worries over China's economy and rising political tensions in Turkey, Russia, Brazil and Malaysia are undermining general confidence.

The Turkish lira, which was down 1 percent on Tuesday, and the Russian rouble have suffered steep falls this week, as the currencies of both succumbed to the political uncertainty. Also under strain is the Chilean peso — which fell 1.4 percent on Tuesday following a slump in the price of copper — and the Colombian peso, which is hamstrung by a declining oil price.

China's exchange rate policy switch and market concerns about the state of its economy is weighing on Asian neighbors, pushing down the Malaysian ringgit, the South Korean won and the Taiwanese dollar.