Emerging markets exchange traded funds (ETFs) experienced their worst month in a year, but emerging markets may be set to fuel the next wave of global investments.
iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) and Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) are both down more than 4% in the past month, but the two funds have been making some headway in the past week.
Cynthia Lin and Dawn Kissi of The Wall Street Journal report these emerging countries are in better fiscal shape than many developed countries and these markets are playing a greater role in the global economy.
The MSCI Emerging Markets Index fell 3% in May, the largest contraction since May 2010, report Chan Tien Hin and Chris Kay for Bloomberg. The index was supported by the information technology and health care sectors. Notable performers include the South Korea Kospi Index, which was up 2.3%, the Turkey ISE National 100 Index, which was up 2.5%, and the Brazil Bovespa Index, which was up 1%.
- iShares MSCI South Korea (NYSEArca: EWY)
- iShares MSCI Turkey Investable Market Index Fund (NYSEArca: TUR)
- iShares MSCI Brazil Index Fund (NYSEArca: EWZ)
The MSCI emerging markets gauge has increased 1.4% year-to-date while the MSCI World Index, a measure for developed markets, gained 5.8% year-to-date.
According to HSBC, emerging markets are experiencing strong fundamentals and copious liquidity, whereas developed economies are showing lagging or even deteriorating economic outlooks, which may support emerging market investments over the short-term, writes Agustino Fontevecchia for Forbes. Recent data also shows that capital flows are being funneled from developed market funds to both fixed-income and equity funds in emerging markets.