As investors return to the markets with a more risk-on attitude, emerging market-related ETFs have been a popular play so far in the new year.
For example, the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), the second largest emerging market-related ETF, was the second most popular ETF play so far in 2019, attracting close to $2.5 billion in net inflows year-to-date, according to XTF data.
The emerging market ETF play has increased 6.1% this year as more investors looked to cheaper global opportunities after the global pullback, with one investor executing a couple of massive block trades last week, which helped push assets up by $5 billion to an all-time high of $54.3 billion, according to Bloomberg data.
Furthermore, it is not just emerging market stocks that are attracting more attention. Fixed-income investors are also looking into developing market debt as a bargain play and as a way to generate more attractive yields in the continued low-yield environment.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ: EMB), the largest emerging market bond-related ETF, was also among the most popular plays so far this year, bringing in $1.2 billion in net inflows so far in 2019. EMB gained 2.7% year-to-date while the benchmark Bloomberg Barclays US Aggregate Bond Index remained flat.
Developing market assets have strengthened in the new year after plunging over 2018 in response to a number a negative factors, including the escalating U.S.-China trade war, Federal Reserve interest rate hikes, a stronger U.S. dollar and weakening global economic outlook.
However, investors are turning more risk-on amid bets the Fed will pause its tightening monetary policy cycle and on hopes that Washington and Beijing could reach a trade deal soon. Meanwhile, cheaper valuations in what appeared to be an oversold market also contributed to the recovery, with many market observers taking a bullish call on this beleaguered segment of the global market.
For more information on the developing markets, visit our emerging markets category.