Emerging Market ETFs: Investors Betting Against China

The iShares FTSE China 25 (NYSEArca: FXI) and other ETFs for emerging economies have been lagging the S&P 500 and other developed markets in 2013. Some investors are positioning for further weakness in emerging markets by betting against the China ETF.

Short interest in the China fund is more than 3% of total shares outstanding, the highest since June 2007, according to Bloomberg News.

FXI is down 11% year to date while SPDR S&P 500 ETF (NYSEArca: SPY) is up about 10%.

Last week, China said its economy grew by 7.7% in the first quarter, less than economists had expected.

“The Chinese economy is showing soft growth momentum in the first quarter,” said Wei Yao of Societe Generale in a BBC News report. “All these figures showed that the economy is in a weak recovery.”

FXI, the China ETF, has experienced net outflows of more than $1.4 billion year to date, according to IndexUniverse.