Emerging Market ETF Volatility Bumps Higher on Oil Weakness

ETF Trends

The iShares MSCI Emerging Markets (EEM) rebounded somewhat with oil prices in Tuesday’s premarket trading following the previous session’s sell-off.

EEM fell the most since November as a pullback in oil prices hit stock markets in commodity exporters Russia and Brazil, according to Bloomberg.

The emerging market ETF has 12.7% of its portfolio in Brazil and 6.2% in Russia, according to manager BlackRock.

A volatility index based on EEM options jumped 10% on Monday to the highest level in 2013. However, a measure of 100-day volatility dropped to the lowest since August 1997, according to the report. [Emerging Market ETFs See Inflows as Volatility Lowest Since 2003]

“You have a pullback in risk as a result of the political jitters coming out of Europe, which is taking precedence over the healthier macroeconomic conditions in emerging markets,” Aryam Vazquez, an economist at Wells Fargo & Co., told Bloomberg. “Many of these emerging market countries are commodities producers, exporters and consumers, and anytime you have a pullback in risk assets such as commodities, emerging markets are going to feel it.”

EEM and other emerging markets ETFs are underperforming the S&P 500 so far in 2013. [Emerging Market ETFs Lagging]

iShares MSCI Emerging Markets

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Full disclosure: Tom Lydon’s clients own EEM.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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