Emerging market exchange traded funds have been among the least loved assets this year as foreign investment in developing economies dipped to the lowest level since the financial downturn.
Year-to-date, 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, experienced net outflows of close to $2.6 billion and $7.0 billion, respectively, according to ETF.com.
Investors have been dumping the asset as emerging markets experienced one of their worst years, with VWO and EEM both down over 19% year-to-date. [Signs of Life From Beaten Down ETF Asset Class]
Developing market equities could seen more pain ahead as the U.S. Federal Reserve readies its first interest rate hike in almost a decade. After years of growth fueled by cheap money and an end to a commodities super-cycle, economists at the Bank of International Settlements warned of negative spillovers with higher borrowing costs, reports Elaine Moore for the Financial Times.
So far, emerging market equity and debt benchmarks have fallen off as net inflows from overseas investors dipped from $285 billion in 2014 to $66 billion this year.
“This has been a miserable year for EM,” Paul McNamara, investment director of emerging markets at GAM, told the Financial Times. “There has been a steady bleed out of assets and no one is certain what shape the market might be in this time next week.”