Emerging Market Investors Shunning Bond ETFs

November 6th at 6:00am by Tom Lydon

Distracted by the rally in the equities market, investors continued pulling assets out of emerging market bond exchange traded funds.

According to EPFR and Nomura Securities data, emerging market bond bled $5 billion in assets in October, compared to a $2.8 billion outflow in September, suggesting investors are not confident in emerging debt, reports Shuli Ren for Barron’s.

In contrast, emerging market equities attracted $1.6 billion in October after $1 billion in September.

Regionally, emerging Asia, Eastern Europe, Middle East and Africa all saw inflows, but investors pulled money out of Latin America equity funds.

Over October, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) rose 4.2%, whereas the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) only rose 0.4% and iShares Emerging Markets Local Currency Bond ETF (NYSEArca: LEMB) increased 2%.

EEM attracted $1.3 billion in assets in October, whereas EMB experienced $211.1 million in outflows, according to IndexUniverse.

Some other emerging market bond ETFs include:

  • PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY): up 1.8% over the past month
  • WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD): up 0.3% over the past month
  • Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC): up 0.4% over the past month

For more information on the bond market, visit our bond ETFs category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own EEM.

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.