Foreign investors returned to emerging-market portfolios in July, investing a net $18.8 billion in debt and equities and ending a two-month streak of outflows, according to data from the Institute of International Finance (IIF) cited by Reuters.The inflows marked a significant improvement from June, when emerging markets recorded a net outflow of $18 billion, and May, when investors withdrew $25.2 billion.Debt leads the recoveryDebt markets accounted for most of the July recovery, attracting $26.7 billion in foreign capital, while equities recorded a $7.8 billion outflow.The equity outflow was nevertheless substantially smaller than the $46.1 billion withdrawn in June, suggesting that…