Investors are dumping emerging market stock exchange traded funds, with global investors redeeming the most from developing stock markets since the financial crisis.
For instance, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) experienced $948.2 million in outflows so far this month.
According to EPFR Global data, global investors pulled $9.3 billion from stocks in developing countries for the week ended Wednesday, the most since 2008, reports Anjani Trivedi for the Wall Street Journal.
Asian markets experienced the greatest outflows as investors yanked $7.9 billion from the region’s equity markets, the most in almost 15 years.
“Money is gradually leaving emerging markets, including Asia,” Paul Chan, chief investment officer of Asia ex-Japan at Invesco Ltd., said in the WSJ article. “It’s a repeat of 2013, but this time we are slowly pricing in the eventual rate hike.”
Specifically, Barclays said that about $6.8 billion came out of funds invested in China, Bloomberg reports.
Chinese A-shares-related ETFs experienced heavy selling over the past week. For example, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) saw $150.4 million in net outflows, despite strengthening this month. The sell-off may have been triggered by the MSCI’s decision to delay the inclusion of Chinese A-shares in its benchmark indices. [MSCI Delays Addition of China A-Shares to Global Indexes]
Fueling the recent selling, speculators anticipate the Federal Reserve to hike interest rates, which would add further pressure on emerging currencies, weigh on exporting countries where current accounts could shrink and diminish foreign market returns.
“Currency is a major culprit,” Goldman Sachs analysts said in a note, forecasting another 4% drop in emerging-market currencies against the U.S. dollar over the next year.
Year-to-date, investors have redeemed $26 billion from emerging market funds, surpassing the total of $24 billion for all of 2014. EEM also experienced $2.7 billion in outflows so far this year.
For more information on the developing markets, visit our emerging markets category.
Max Chen contributed to this article.