Emerging market ETFs continued to bring in inflows as a stabilizing global economy, notably a steadier China, helped diminish some of the cyclical headwinds and improved the near-term outlook for many developing countries. Global trade and manufacturing activity have also picked while commodity prices improved, contributing to more favorable outlook for the emerging market business cycle and corporate earnings outlook. Moreover, emerging market valuations look attractive relative to developed markets after hitting a multi-year low in late 2015 and settled at a lower level.
The August sell-off in gold miners may have contributed to the $1.1 billion in inflows for the VanEck Vectors Gold Miners ETF (NYSEArca: GDX) as traders saw a buying opportunity after a pullback. However, the play may have been premature as gold assets, notably miners, plunged over the past few days.
Furthermore, the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) saw $749 million in inflows. Oil and gas exploration and production companies have been among the worst off during the crude oil sell-off. With the Organization of Petroleum Exporting Countries signalling a potential supply ceiling, oil and energy investments have rallied.
Meanwhile, ETF investors shifted out of foreign developed markets. Among the least popular ETFs of September, the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF) experienced $2.1 billion in net outflows, iShares MSCI EMU ETF (NYSEArca: EZU) saw $766 million in outflows, iShares MSCI EAFE ETF (NYSEArca: EFA) lost $672 million, Vanguard FTSE Europe ETF (NYSEArca: VGK) shrunk by $648 million, iShares Currency Hedged MSCI EAFE ETF (NYSEArca: HEFA) saw $477 million in redemptions and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) lost $468 million.
Financial sector ETFs also took a hit, with Financial Select Sector SPDR (NYSEArca: XLF) losing $1.3 billion and the Vanguard Financials ETF (NYSEArca: VFH) shrinking by $896 million, but the outflows may have been impacted by index changes to the status of real estate investment trusts.