Emerging Market ETFs Come Roaring Back

September 11th at 12:41pm by Paul Weisbruch, Street One Financial

We have talked about the 2013 trend of bleeding assets in two leading Emerging Markets Equity based funds throughout this year in these columns, and with a sudden reversal in activity in the space it is warranted to make comment again.

EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) has suddenly reeled in $1.5 billion in fresh new assets via creation activity in recent sessions, and we had noted that prior to this activity the fund had shed more than $8 billion in assets just year to date.

Put buyers remain present in EEM despite the recent positive price action, but given the severe choppiness and volatility in the EM space throughout this year, generally tied to similar volatility in the Chinese equity market (given China has an 18.10% weighting in the MSCI EM Index and is the single largest country allocation).

Also of note is FXI (iShares China Large Cap, Expense Ratio 0.72%) which has also recently reversed course and vaulted impressively above its 200 day moving average in the last couple sessions.

FXI has suffered in terms of asset raising year to date as well, losing $2.1 billion in total in 2013.

Typically when we see creation/redemption flows in EEM, we see similar action in related ETF VWO (Vanguard FTSE Emerging Markets, Expense Ratio 0.18%), but we have not seen creates in VWO in the past couple days this time around.

EEM still wins the battle hands down in terms of options liquidity and open interest when compared head to head against VWO, as hedgers and speculators typically jump to EEM first when putting on or taking off sizable options trades in the EM space, and this is a major factor for many institutional managers (especially hedge funds and funds that typically trade quickly in size, incorporating ETF/options strategies) when determining “best fit” for portfolios among broad tracking EM ETFs.

Given the recent volatility in the EM space and particularly China, we have our eyes on several leveraged and inverse products at this juncture as well, including EDC (Direxion Daily Emerging Markets Bull 3X, Expense Ratio 0.95%), EDZ (Direxion Daily Emerging Markets Bear 3X, Expense Ratio 0.95%), YINN (Direxion Daily China Bull 3X, Expense Ratio 0.95%), YANG (Direxion Daily China Bear 3X, Expense Ratio 0.95%), YXI (ProShares Short FTSE China 25, Expense Ratio 0.95%), EUM (ProShares Short MSCI Emerging Markets, Expense Ratio 0.95%), FXP (ProShares UltraShort FTSE China 25, Expense Ratio 0.95%), EEV (ProShares UltraShort MSCI Emerging Markets, Expense Ratio 0.95%), XPP (ProShares Ultra FTSE China 25, Expense Ratio 0.95%) and EET (ProShares Ultra MSCI Emerging Markets, Expeense Ratio 0.95%).

iShares MSCI Emerging Markets

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

Street One Financial is an educational/research firm utilizing the Broker Dealer services of GWM Group Inc (RLCC) a FINRA registered Broker/Dealer. All trades are executed through GWM Group (RLCC) and cleared by Fidelity (NFS)DTC number 0226. Street One Financial LLC makes available products and services offered by GWM Group Inc., a registered broker-dealer and Member Securities Investor Protection Corporation (SIPC), Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

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