Emerging market exchange traded funds experienced one of their worst week of sales in months as market volatility pummeled riskier equities.
According to J.P. Morgan estimates, emerging market funds experienced $3.5 billion in net redemptions, reports Dimitra DeFotis for Barron’s. Emerging market ETFs shrunk by $1.9 billion.
So far this year, emerging market equity funds have lost $5.3 billion in assets, with emerging markets ETFs contracting by $3.2 billion.
For the week ended Oct. 10, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) experienced $1.12 billion in outflows, according to ETF.com data. However, the rival Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) added $420,000. [Emerging Market ETF Investors Are Getting Skittish]
The MSCI Emerging Markets Index has dropped as much as 10% from the September high this year, signaling a correction to some investors. Since the September 5 high, EEM is down 10.8% and VWO is 10.9% lower.
The emerging markets could continue to experience swings as investors focus on countries that are more likely to benefit from exports to the U.S. while avoiding areas that provide materials for a slowing China, reports Chris Vellacott for Reuters. Instead, investors need to selectively choose their country exposure.
“Simply increasing broad exposure to emerging markets is no longer enough and it is necessary to discriminate between countries and regions,” Richard Titherington, head of emerging market equities, at JP Morgan Asset Management, said.
Brazil ETFs have experienced large flows as investors traded on elections news. Investors pulled over $293 million from the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), the largest Brazil ETF, last week after pouring $908.5 million into the ETF as it slumped during the third quarter. [Another Monday, Another Neves Surge for Brazil ETFs]
On the other hand, South Africa has stood out, with the iShares MSCI South Africa ETF (NYSEArca: EZA) experiencing $346 million in inflows. Offshore investors acquired $460 million worth of South African stocks last week, according to Reuters data. South African stocks strengthened Monday led by mining companies after China revealed that imports unexpectedly gained in September, Reuters reports. EZA was up 1.6% Monday.
For more information on developing economies, visit our emerging markets category.
Max Chen contributed to this article.