At the height of the recent concerns about European debt and the U.S. economic recovery, emerging market exchange traded funds (ETFs) were selling like cold hotcakes. Now things look different.

In July, the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) experienced a 37% reduction in dollar bets against the fund as compared to the previous month, according to Dave Nadig for IndexUniverse, a signal that investors are feeling warmly about emerging markets once again. [Consumer ETFs: Going Global to Find Strength.]

Short selling on the iShares FTSE/Xinhua China 25 (NYSEArca: FXI) diminished by 19.9% as compared to the previous month. [EEM vs. VWO: Report from the Front Lines.]

The trend seems to indicate that investors are becoming a bit more risk tolerant as they reduce short selling emerging markets, remarks Nadig.

Meanwhile, bets against the developed markets as reflected by the iShares MSCI EAFE (NYSEArca: EFA) increased by 12.8%.

The renewed sentiment can be seen in the fund flows from July, too: $1.5 billion poured into iShares MSCI Emerging Markets (NYSEArca: EEM), while Vanguard Emerging Markets (NYSEArca: VWO) raked in a cool $2 billion.

For more information on emerging markets, 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.