Large institutional investors have rushed into developing economies, strengthening emerging market currencies and related exchange traded funds.
Since the European Central Bank is enacting monetary easing, global bond investors have switched from Eurozone periphery assets to emerging markets, Financial Times reports.
Richard Cochinos, a strategist at Citigroup, points out that institutional investors are acquiring emerging market assets, notably in Asia, on a scale that the bank’s client flow data had never seen before.
“We don’t see them selling out of these positions,” Cochinos.
Emerging market currency ETFs have strengthened this year, with the WisdomTree Emerging Currency Strategy Fund (NYSEArca: CEW), which tracks up a group of eastern European, African, Latin American and Asian currencies, is up 1.7% year-to-date. Additionally, the iPath GEMS Index ETN (NYSEArca: JEM), which also tracks a broad basket of emerging market currencies, is up 2.4% so far this year.
Meanwhile, the iPath GEMS Asia 8 ETN (NYSEArca: AYT), which focuses on Asian currencies, including the Indonesian rupiah, the Indian rupee, the Philippine peso, the South Korean won, the Thai baht, the Malaysian ringgit, the Taiwanese dollar and the Chinese yuan, is up 3.0% this year.