Emerging market exchange traded funds have been outperforming U.S. stocks so far this year on increased risk appetite and dovish signals from central banks. Now, ETFs tracking broad developing-markets indexes and China are trying to vault over the 200-day moving average for the first time since the August waterfall decline.
Vanguard Emerging Markets (NYSEArca: VWO) was up 11.6% year to date as of Jan. 27, more than doubling the 5% gain of the iShares S&P 500 (NYSEArca: IVV), according to investment researcher Morningstar. However, emerging market ETFs were seeing bigger losses in Monday’s risk-off trading.
Other large ETFs in the category include iShares MSCI Emerging Markets (NYSEArca: EEM) and WisdomTree Emerging Markets High Yielding Equity (NYSEArca: DEM). [ETF Spotlight: Emerging Markets Dividend Fund]
Interest in emerging market funds hit the highest level in 42 weeks, MarketWatch reports.
“Investors recovered their appetite for Asia’s story and factored in the monetary easing they now expect from the European Central Bank and the U.S. Federal Reserve,” EPFR Global said in the report. “In addition to growing faith in a ‘soft landing’ for China’s economy, investors are responding to some big sell-offs last year and the general shift among emerging markets to more accommodative fiscal and monetary policy.”
Vanguard Emerging Markets has seen huge inflows recently and took in $1 billion last week. [ETF Weekly Recap]
Technically, the emerging market fund and iShares FTSE China 25 Index Fund (NYSEArca: FXI) are breaking through their 200-day exponential moving average. This is the first time they have been above this key technical barometer since the summer correction. [China ETFs: Year of the Dragon]