The top asset inflows for notable U.S.-listed ETFs in the past week based on IndexUniverse data were: #1 SPY (SPDR S&P 500) $1 billion #2 EEM (iShares MSCI Emerging Markets) >$750 million #3 LQD (iShares Investment Grade Corporate Bond) >$550 million #4 EWZ (iShares MSCI Brazil) >$500 million #5 FXI (iShares FTSE China 25) >$440 million.
Note the clear “theme” of inflows to Emerging Markets/BRIC ETFs last week, but these buyers were rudely surprised by Friday’s steep sell-off.
Year to date, two of the largest component weightings in the EM Indexes (China and Brazil, at 17.76% and 10.80% weightings respectively), are severe laggards when compared to the predominant U.S. Equity benchmark, the SPX which is up 14.17% YTD. FXI is up 6.54% and EWZ down 5.28% in comparison YTD. Also, the broader EEM (iShares MSCI EM Index) is up 9.30% YTD, showing that other EM regions such as South Korea and Taiwan are largely netting out Brazil’s very poor 2012 showing thus far.
It does seem feasible that investors that are under-allocated to equities going into the final months of 2012 are chasing higher beta in the form of these EM ETFs. Options flows in the EM space have agreed recently with these ETF creation flows, as we have witnessed mostly call buying in EWZ and FXI, as well as mixed flows (calls/puts), in the broader EEM.
The top asset outflows among notable ETFs included: #1 MDY (SPDR S&P Midcap 400) -$380 million #2 GLD (SPDR Gold) -$370 million #3 GOVT (iShares Barclays U.S. Treasury Bond) -$266 million, #4 QQQ (PowerShares QQQ) -$249 million #5 XLK (SPDR Technology) -$183 million.
We cannot talk about outflows in Technology related ETFs above, QQQ and XLK without mentioning AAPL stock, as we did in last week’s recap, and now we have to also add a quick discussion about GOOG stock. As we have mentioned frequently throughout the course of 2012, AAPL’s hefty weight in Tech related Indices/ETFs squarely put the name in focus as it rises and falls, as it truly has the ability to influence shorter, and longer term moves of at least the entire tech sector given this weighting.