While markets roiled over the past week, exchange traded fund investors have been shifting into the emerging markets.
Among most in-demand ETFs of the past week, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) attracted $1.3 billion in net inflows and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) saw $1.0 billion in new creations, according to ETFdb data.
VWO, the largest emerging market-related ETF by assets, brought in more money in the five days through Thursday than any of the more than 2,400 other funds in U.S. exchanges, Bloomberg reports. The Vanguard FTSE Emerging Markets ETF enjoyed its biggest weekly inflow in two years.
On the other hand, ETFs that track the Nasdaq 100 Index shares, gold, silver, real estate, global bonds, and inflation-linked securities all suffered heavy outflows. Additionally, dollar debt, which is usually the most popular segment within the emerging markets, was also losing to stocks.
The emerging market space has attracted the attention of some big money managers. For example, Ashmore Group Plc, JPMorgan Chase & Co. and UBS Group AG have all been supporting a bullish case for emerging-market equities so far in 2021, predicting the category to be a prime beneficiary of the post-coronavirus economic recovery process.
Market watchers point to Asia’s relative success in containing the pandemic. China has even returned to positive growth in 2020. Additionally, vaccine breakthroughs in China, India, and Russia, along with renewed demand for commodities and Joe Biden’s $1.9 trillion stimulus plan are all contributing to the broader optimism.
Meanwhile, analysts have been upwardly revising earnings estimates on emerging-market companies faster than for those in developed countries. In comparison, projections are relatively unchanged in the U.S. They are even 11% lower across Europe.
Bargain hunters are also eyeing developing economies. Emerging-market stocks trade at an almost 29% discount to U.S. markets, compared to an average of 25% over the past 15 years.
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