Investors Dump Emerging Market ETFs

August 28th at 12:40pm by Tom Lydon

In anticipation to an end to easy money, investors pulled billions of dollars out of emerging market exchange traded funds. Nevertheless, people shouldn’t dismiss developing economies so readily.

According to EPFR Global, emerging market fund outflows was $5.9 billion last week year-to-date, reports Sarah Krouse for the Wall Street Journal.

In the week ended Aug. 21 alone, investors pulled $1.4 billion out of U.S.-listed emerging market ETFs. Globally, investors yanked $1.7 billion out of emerging market equity funds.

Emerging market ETFs provide liquid exposure to traditionally illiquid markets.

“They [ETFs] magnify the moves on both sides – on the way up and the way down,” Slim Feriani, CEO of emerging and frontier market fund management firm Advance Emerging Capital, said in the article.

However, some institutional investors are positioning for the long haul as the emerging market growth story will outpace developed economies for the foreseeable future. [BlackRock: Don’t Give Up on Emerging Market ETFs]

For instance, Morgan Stanley research last Friday revealed net inflows of $350 million for the week from non-ETF institutional investors.

Ashmore Chief executive Mark Coombs said that there is increased demand from institutional clients “who recognize the long term attractions of allocating to emerging markets.”

For more information on developing economies, visit our emerging markets category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers