Emerging markets stocks and the related exchange traded funds have been among the most obvious laggards this year, but recent data points indicate traders are buying some marquee ETFs tracking developing economies.
Those funds include the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), the two largest emerging markets ETF by assets. In fact, emerging markets ETFs have seen inflows for several consecutive weeks dating back to October.
“Inflows to U.S.-listed exchange-traded funds that invest across developing nations as well as those that target specific countries hit $1.28 billion in the week ended Nov. 23, bringing this year’s total to $20.5 billion,” reports Bloomberg.
After the recent pullback in the equities market, bargain hunters may look to beleaguered emerging market stocks and region-related ETFs for cheap value.
According to a recent survey conducted by Bank of America Merrill Lynch, investor allocation to emerging market equities surged to 13% in November from 5% in October, the Wall Street Journal reports.
Signs Of Life
Investment bank Goldman Sachs expected emerging market shares, currencies and bonds to see a modest rebound next year, Reuters reports.
“We expect modest positive returns across the major EM indices next year, albeit with low risk-adjusted returns,” analysts at Goldman said in a 2019 outlook report.
The bank projected emerging market equities could experience the greatest rise at 12% in dollar terms, while EM currencies should strengthen by around 2% on average on economic improvements and a modestly weaker U.S. dollar. Meanwhile, in the local currency bond market, they added that closely tracked GBI-EM debt index could see a 10% rebound on an “unhedged” basis and including “duration effects”.
“The Vanguard FTSE Emerging Markets ETF has received $421 million this month, and the iShares Core MSCI Emerging Markets ETF saw inflows of $2.2 billion — the equivalent of 4.6 percent of its assets under management,” according to Bloomberg.
The recent inflows are reversal of the trend seen earlier this year when investors pulled $10 billion from emerging markets ETFs in the first two quarters of the year.
Courtesy: Bloomberg
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