As the popularity of ETFs growt, more investors are becoming with more niche or targeted strategies, like country-specific ETFs, to quickly and easily gain exposure to various market segments.
“The fact the money went largely to ETFs is consistent with investors rushing to establish short positions,” Cameron Brandt, director of research at EPFR, told FT. “But it is also true that investors have been conditioned in recent years to see any sell-off as a buying opportunity that will disappear quickly.”
Nevertheless, some warned that there is greater risk of further pullbacks in the extended global bull market, especially in riskier segments like the emerging markets. Even after the recent pullback, EWZ is still up 4.8% year-to-date and 36.6% higher over the past year.
“People substantially increased their exposure [to emerging markets]and those increases happened at valuation levels not far from the peak,” Guillermo Osses, head of emerging market debt strategies at Man GLG, warned. “The chances of a correction in emerging markets broadly and in Brazil in particular are meaningful.”
For more information on the Brazilian markets, visit our Brazil category.