Concerned that free flowing liquidity from years of loose monetary policies will soon come to an end, investors are shifting away from emerging market assets and exchange traded funds.
The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) lost 3% over the past month. The fund is down 5.1% year-to-date.
However, previously hot single-country ETFs for developing economies have been among the worst performers the past month.
Southeast Asia has been hit particularly hard. “Stock markets in Indonesia, the Philippines and Thailand have gone from being the world’s best to among the worst as the threat of reduced bond purchases by the U.S. Federal Reserve sends foreign investors to the exit,” Bloomberg reports.
“People are really worried we will see a 1994-type market event, when the Fed hiked rates and emerging markets suffered a lot,” Pierre-Yves Bareau, head of emerging debt at JPMorgan Asset Management, said in a Reuters article.
The emerging markets have been riding the investment wave fueled by easy liquidity. According to EPFR Global data, $46 billion has flowed into emerging market stocks and bonds so far this year after adding $90 billion in new inflows last year. [Emerging Market ETFs Test Long-Term Trends and Support]