ETF Trends
ETF Trends

While more people are dipping their toes back into emerging market stocks and exchange traded funds, institutional investors warn that the improved strength in developing markets is only a tactical value play and not a long-term trend.

After the broad sell-off in the first quarter, emerging market stocks are hovering near a five-month high, reports Natsuko Waki for Reuters. [EEM’s Relative Strength Looks Good Against S&P 500]

The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) has surged 7.1% and iShares MSCI Emerging Markets ETF (NYSEArca: EEM) gained 6.6% over the past month. [Overweighting Equity ETFs, Foreign and Domestic]

In the past two weeks, emerging market equity funds have attracted $5.4 billion in inflows, according to EPFR data.

However, some observers are concerned about long-term structural economic difficulties in the emerging markets, like higher cost of funding for companies.

“The long-term investment landscape suggests emerging markets will continue to underperform in the long run,” Andy Warwick, multi-asset portfolio manager at BlackRock, said in the article. “A rising rates and strengthening dollar environment is a real headwind.”

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