Emerging market ETFs underperformed developed economies in January with Egypt and South Africa funds off to the worst start in 2013 for the category.
The iShares MSCI Emerging Markets (NYSEArca: EEM) was down 0.5% as of Jan. 30 while the SPDR S&P 500 (NYSEArca: SPY) gained 5.4%, according to Morningstar.
The emerging market fund traded lower Wednesday following a report the U.S. economy unexpectedly contracted in the fourth quarter. GDP fell at a 0.1% annual rate.
“The U.S. economy still is the world’s biggest economy, and what happens in the U.S. matters to emerging markets,” Neil Shearing, chief emerging markets economist at Capital Economics, told Bloomberg News. “This will perhaps rekindle some fears of the pace of recovery in the developed world, and if that slows, growth in the emerging world will tend to slow, with export demand weakened in particular.”
The iShares MSCI South Africa (NYSEArca: EZA) is the worst-performing ETF year to date with a loss of nearly 9%. SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF) is off 8% and Market Vectors Egypt Index ETF (NYSEArca: EGPT) is down over 2%.
Fitch Ratings downgraded Egypt, citing a worsening fiscal position, political turmoil and deteriorating economic growth, according to the Bloomberg report.