Investors pulled out of riskier emerging markets as data showed growth from China’s economy slowed, commodity prices fell and the Federal Reserve signaled an interest rate hike this year. The China slowdown is fueling the lower commodity prices and lower outlook for other major emerging economies. Moreover, rising borrowing costs, a stronger dollar and rising corporate debt loads, with the International Monetary Fund warning of corporate defaults, are adding to volatility.
Meanwhile, EEM fell 17.3% and VWO decreased 17.9% over the past three months, on pace for the largest decline in four years.
“The reaction we’re seeing is quite severe, but a lot of the damage has already probably taken place,” Brendan Ahern, managing director of Krane Fund Advisors LLC, told Bloomberg. “It’s the trifecta of slowing investment growth, declining commodity prices and the strong dollar.”
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Max Chen contributed to this article.