The U.S. and global market rally since March 9, 2009, has been questioned by many. Naturally, the skepticism is now being extended to emerging market exchange traded funds (ETFs). Some investors have started to doubt the sustainability of recent gains.
In the Reuters European Fund Summit in Luxembourg, fund managers expressed thrill over the huge demand in emerging market assets while some strategists provided a cautionary note, reports Jeremy Gaunt for Reuters. Emerging market funds tracked by EPFR Global touched a nine-week high in mid-March. Asia ex-Japan equity funds pulled in $730 million for the week ending March 17, Latin America equity funds reached an eight-week high and EMEA equity funds is on a four-week inflow streak. [Emerging Markets and ETFs: What’s in a Definition?]
Manooj Mistry, head of exchange-traded fund structuring at Deutsche Bank, stated that investments in emerging market ETFs have increased to $3.7 billion from $2 billion year-over-year. [Why India Is a Proving Ground for Global Markets.]
Andrea Favaloro, European head of retail for BNP Paribas Investment Partners and Fortis Investments, noted that his retail clients were asking for riskier assets, more notably emerging markets.
However, Marcel Schnyder, LGT Capital Management’s head of multi-asset investment management, warned that a bubble may be forming in emerging markets, along with gold, government bonds and ETFs. Worried observers argue that a large amount of money is pouring into a limited number of emerging market investments, which could drive up prices too quickly and beyond reasonable levels. [Best ETFs for a Brazil-Mexico Rivalry.]