The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets exchange traded funds by assets, are just two of the big-name emerging markets ETFs that are facing considerable headwinds.

Some fund managers believe it will be a while before emerging markets stocks recover in earnest. 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. [Area Emerging Market ETF Investors Must Monitor]

“Fortress Investment Group LLC told investors that the emerging markets are at a beginning of a bear market that could rival the Asian financial crisis of 1997. The sell-off in emerging markets, which began in June, has led to a credit contraction that will last until at least March 2017, according to a letter to investors in Fortress Convex Asia Fund Ltd., signed by Singapore-based Chief Investment Officer David Dredge, and fund co-managers Nicholas Heaney and Andy Wong. Fortress said it used past economic cycles as a guide in evaluating the current market,” reports Suzy Waite for Bloomberg.

Investors should look at the emerging market equities as a more cyclical asset. Currently, after years of outperformance in the developed markets, the emerging markets are beginning to show a lower premium to more developed countries. [Look to Emerging Market ETFs in the Second Half]

Since July 2014, more than $1 trillion has been pulled from emerging markets stocks and funds, including mutual funds and ETFs.

According to a monthly fund manager survey from Bank of America Merrill Lynch, exposure to emerging market stocks remained at a record low, reports Dhara Ranasinghe for CNBC. However, after investors dumped the emerging markets this year, developing country stocks now appear more attractive, especially for long-term investors. For instance, VWO has a 12.8 price-to-earning ratio of 12.8 and a price-to-book of 1.6, and EEM has a 11.3 P/E and a 1.3 P/B. In contrast, the S&P 500 is trading at a 17.5 P/E and a 2.4 P/B.

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