While developing country stocks were falling toward a bear market, exchange traded fund investors were buying the dip.
According to recent weekly data from EPFR Global, Turkey saw its highest weekly inflows since the first week of January 2013, CNBC reports
“Based on our flows-based investor positioning model, Turkey replaced Colombia as the most crowded emerging market, while Brazil replaced India as the second least crowded market after Russia,” according to a UBS report.
The iShares MSCI Turkey ETF (NasdaqGM: TUR) saw $147.5 million in net inflows over the past week, according to XTF data.
China was also attracting greater interest, with the iShares China Large-Cap ETF (NYSEArca: FXI) seeing $165.2 million in net inflows over the past week.
On the other hand, Brazil was one of the more hated areas of the market, with the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) experiencing $361.7 million in net outflows for the past week.
In the most recent tumult, the currency crisis in the Turkish lira has spread and fueled risk-off sentiment for many emerging markets.
“Contagion risks from Turkey have impacted emerging markets with most high-yielders and consensus-long positions coming under material pressure in recent days,” Mark Dowding, a senior portfolio manager at BlueBay Asset Management, said in a note. “Countries with large current account deficits and substantial short-term funding needs appear the most.”
Holger Schmieding, chief economist at Berenberg, argued that since the strong economic growth since the financial crisis, many emerging markets benefited from improved private sector balance sheets and elevated foreign exchange reserves.
“This should help most of them to withstand the Turkish tremors with little damage,” Schmieding told CNBC. “China looks safe while high oil prices and an independent central bank support Russia.”
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