As we mentioned above in our Options recap, there has been some nibbling in EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) June 40 puts ahead of today’s weakness in the product, as we see it trading below its 200 day MA for the first time since early April.
Top country weightings in this ETF are China (23%), South Korea (14%), and Taiwan (13%). Although EEM tends to command the options traffic in terms of Emerging Markets Equity ETFs listed in the U.S. it is not the largest ETF in terms of asset size ($31.4 billion) in the space, trailing VWO (Vanguard Emerging Markets, Expense Ratio 0.15%) which has $48.7 billion in assets under management currently.
Year to date fund flows in VWO have been rather flattish given the fund size, with a net of about $85 million entering via creation activity, as compared to EEM’s notable $2 billion of outflows.
Clearly, there is a notable dichotomy here in terms of year to date flows, and we are not quite sure what to make of it since both products track very similar benchmarks.
This morning Taiwan is being hit especially hard, evident in the nearly 3% sell-off in EWT (iShares MSCI Taiwan, Expense Ratio 0.62%), and the product is clinging to its 200 day MA, a level it has not seen since March.
This price pressure in Taiwan is clearly weighing on both EEM and VWO (as the country carries a 14% weighting in VWO) Market Technician David Chojnacki has provided an in depth technical analysis of VWO (below), pointing out near term support levels, MACD, and RSI.
Vanguard FTSE Emerging Markets ETF