We spoke about bears stalking Emerging Markets based ETFs lately in recent recaps (October 25th specifically), with EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) puts trading in good size as the ETF has clipped its 200 day moving average.
Related ETF VWO (Vanguard FTSE Emerging Markets, Expense Ratio 0.18%) has also staggered and both funds have seen about $680 million and $975 million flow out respectively in the last few sessions. Yesterday we saw some adjustment in a hedge taking place in the marketplace as someone closed out a long November 42.50 put position in EEM to buy December 41.50 puts in notable size.
Not surprisingly, activity has picked up in inverse and leveraged inverse products that track to the Emerging Markets including EDZ (Direxion Daily Emerging Markets Bear 3X Shares, Expense Ratio 0.95%), YANG (Direxion Daily China Bear 3X Shares, Expense Ratio 0.95%), EEV (ProShares UltraShort MSCI Emerging Markets, Expense Ratio 0.95%), EUM (ProShares Short MSCI Emerging Markets, Expense Ratio 0.95%), FXP (ProShares UltraShort FTSE China 25, Expense Ratio 0.95%) and YXI (ProShares Short FTSE China 25, Expense Ratio 0.95%) as it seems that investors continue to take a cautious stance heading into year’s end in Emerging Markets.
The recent weakness in the space has been fueled by a fairly steep sell-off in Brazil and Taiwan, accompanied by weakness in China and South Korea likewise. Year to date EEM and VWO have had a tough time in terms of raising assets as EEM has seen more than $3 billion flow out while VWO has hemorrhaged $6.7 billion.
Interestingly, these assets seem to have found a home elsewhere in some cases, as competing ETFs in the EM space like DEM (WisdomTree Emerging Markets Equity Income, Expense Ratio 0.63%, +$690 million YTD), IEMG (iShares Core MSCI Emerging Markets, Expense Ratio 0.18%, +%2.55 billion, EEMV (iShares MSCI Emerging Markets Minimum Volatility, Expense Ratio 0.25%, +$1.9 billion), DGS (WisdomTree Emerging Markets SmallCap Dividend, Expense Ratio 0.64%, +$650 million YTD).