Investors are piling back into emerging markets (EM) to start 2021 after a pandemic-ridden year saw outflows in EM assets. As investors return, trades can capitalize on the shift back to EM with triple the leverage using Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC).
“Investors have piled billions of dollars into emerging market assets at the start of 2021 after a banner end to last year, showing how the flood of central bank stimulus continues to drive a frantic hunt for returns,” a Financial Times article noted. “A group of 30 major developing countries has attracted $17bn in inflows in the first three weeks of January alone, according to a Financial Times analysis of daily data from the Institute of International Finance.”
“The strong start to 2021, with inflows largely aimed at equities, comes after a dramatic shift last year,” the article added further, noting a large drop in risk assets like EM during the height of the pandemic. “After a record exodus of almost $90 billion in March at the onset of the pandemic, investors returned to EM stock and bond markets in a rising flood, with almost $180bn in the fourth quarter bringing total inflows in the final nine months of 2020 to more than $360 billion, according to a broader IIF dataset that tracks 63 emerging economies.”
EDC seeks daily investment results equal to 300% of the daily performance of the MSCI Emerging Markets IndexSM. The fund invests at least 80% of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index is designed to represent the performance of large- and mid-capitalizations securities across 26 emerging market countries. Looking at its top holdings, there’s an obvious tilt towards Asia. India and Brazil round out the top five country allocations.
Big Tech Fueling EDC’s Gains
EDC is up about 30% to start the year, and 37% within the past year. Its holdings emphasize big tech Asian companies like Taiwan Semiconductor Manufacturing and Tencent Holdings.
As the vaccine rollout continues, expect a continued reliance on tech by emerging markets countries.
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