While world markets stumbled this year, investors have been betting on a rebound in the developing economies, funneling billions of dollars into emerging market-related ETFs.
U.S.-listed ETFs that track developing countries, along with targeted country-specific ETFs, attracted $1.28 billion for the week ended November 23, marking their sixth consecutive week of inflows, and experienced total inflows of around $20.5 billion for the year, Bloomberg reports.
For example, the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) was among the most popular ETF plays over the past week, bringing in $701 million in net inflows, according to XTF data.
Over November, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) brought in $421 in new inflows while IEMG saw inflows of $2.2 billion.
The turnaround on emerging market sentiment is a stark contrast to the over $10 billion in redemptions the emerging market ETFs experienced in the first half of the year after the steep sell-off from the initial trade war fears.
“Double upgrade” to emerging-market stocks
Money managers from Aberdeen Standard Investments, Schroders Plc, Goldman Sachs Asset Management, BlackRock Inc. and Morgan Stanley, which announced a “double upgrade” to emerging-market stocks, began to overweight the emerging markets after a hint that the Federal Reserve could pause on rate hikes next year due to a slowdown in growth.
Related: Emerging Market ETFs Could Pick Up in 2019
Furthermore, traders grew more optimistic over the emerging market outlook ahead of the sit down between President Xi Jinping and Donald Trump on hopes of a resolution to the escalating trade war between China and the U.S. Daniel Morris at BNP Paribas Asset Management argued that the smallest steps to resolving the trade dispute would be a welcomed relief.
“A softer tone expected from the Fed, a possible trade detente at the G-20 meeting and expectations of a weaker dollar in 2019 are key positive themes,” Greg Lesko, a money manager at Deltec Asset Management, told Bloomberg. “Plus, the market is down so much.”
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