Soaring emerging market exchange traded funds (ETFs) have lured investors in droves this year. A recent tally of the numbers underscored just how much this is true.
Emerging market ETFs have already seen inflows hit $30.5 billion at the end of August, which surpassed inflows of $24.8 billion for the whole of 2009, writes Chris Flood for The Financial Times. If investors continue their pace, total inflows for the year could even top an estimated $45.7 billion, or up 84% year-over-year. [Emerging Market ETFs Getting Hotter.]
Broken down, it’s still an interesting picture:
- Equity emerging market ETFs saw an additional $27.9 billion for the first 10 months of the year, which was more than 2009’s inflows of $23.2 billion.
- Fixed-income emerging market ETFs hit $2.4 billion by the end of August, exceeding inflows of $1.5 billion for the whole of last year. It is estimated that inflows could reach $3.6 billion by the end of the year.
- Currency emerging market ETFs took in an additional $208.7 million by August, compared to inflows of $77.6 million for 2009. Chinese currency ETFs have been heavily traded as investors bet on the likelihood of revaluation of the renminbi. Additionally, China is still the largest investment destination in single-country equity ETFs. [China ETFs: Economic Indicators Are Looking Good.]
Though some of the funds below are larger than others, you can clearly see the asset growth:
- iShares MSCI Emerging Index Fund (NYSEArca: EEM): up 37% in the last year
- Vanguard Emerging Markets ETF (NYSEArca: VWO): up 155.2% in the last year
- WisdomTree Emerging Markets Equity (NYSEArca: DEM): up 132% in the last year
- EGShares Emerging Markets Large-Cap (NYSEArca: EEG): up 125% in the last year
The move to emerging market equities could continue in the wake of a report from JP Morgan, which stated that the asset class would outperform emerging market bonds next year. The reason? Rising Treasury yields in the United States, say Jason Webb and Michael Patterson for BusinessWeek.
Though emerging markets clearly have been scorching, don’t get caught up in over-exuberance. This is a good time to dust off your exit strategy and have it ready, just in case. Trends don’t last forever, and emerging markets may encounter bumps along the road to prosperity.
For more information on the 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.