The wild oscillations are seen as excessive and BIS economists argue that the broad swings reveal the greater hand institutions and ETFs have on the emerging markets, as opposed to developed equities.
For instance, EM bond funds’ assets under management have quadrupled to $340 billion in the four years ended 2013. According to BIS, 1 percentage point reallocation of assets by the largest 500 managers, which manage a combined $70 trillion, could affect $700 billion in asset flows across the emerging markets. In comparison, the emerging markets saw $246 billion in outflows over the 2008 crash and $368 billion in inflows over 2012.
Additionally, BIS discovered that due to the dearth of broad emerging market benchmarks relative to developed markets, those that exist tend to correlated with one another. The iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which tracks the MSCI EM Index, is up 6.4% year-to-date and Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), which tracks a FTSE EM Index, is up 9.8% so far this year. [Emerging Markets ETFs are Hauling in Plenty of Cash]
For more information on developing economies, visit our emerging markets category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of EEM.