ETF Chart of the Day: South of the Border Tears

ETF Trends

We have spent a considerable amount of time talking about selling pressure and net outflows in broad based Emerging Markets funds, specifically EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) and VWO (Vanguard Emerging Markets, Expense Ratio 0.18%) in recent weeks and months, and this tumultuous week has been no exception to the recent trend.

EEM has seen more than $3.3 billion exit the fund via redemptions in recent sessions while VWO has similarly seen about $1 billion flow out during the same time frame amid neverending headlines tied to Emerging Market currency distress.

Trading volume has been significantly above average all week long in both EEM and VWO, as has options activity, particularly in EEM. Latin America has clearly weighed on Emerging Markets lately, with the fourth largest
country component in the MSCI EM Index, Brazil, seeing its benchmark ETF EWZ (iShares MSCI Brazil, Expense Ratio 0.60%) trade at multi-year lows today despite a brief pop amid upside call buying yesterday.

EWZ’s asset flows at these levels have been somewhat stable, actually seeing net inflows of about $100 million in recent days, but in the trailing one year period the fund has seen more than $3.3 billion vacate via redemptions.

Still, EWZ remains the largest “Latin America Equity” focused ETP across the current product landscape, trailed by several other funds that have to be on daily radars at this point thanks to the new environment we seem to be in regarding potential EM currency distress and the presence of constant kneejerk coverage and headlines.

EWW (iShares MSCI Mexico Investable Market, Expense Ratio 0.52%) has seen impressive asset growth over the trailing one year period despite poor Latin American equity performance, pulling in >$650 million in the trailing one year period and growing to be the second largest fund in this category in terms of AUM, with about $2.45 billion currently.

Meanwhile, ILF (iShares S&P Latin America 40, Expense Ratio 0.50%) is next in line in terms of size but substantially smaller with $800 million in assets under management, but this fund has been rather hard hit in terms of net redemptions over the trailing one year period, losing >$500 million as the price has plunged to new recent lows.

Trading volume in ILF spiked yesterday compared to the daily average, with more than 1.5 million shares changing hands versus ADV of 497,000 shares, and we expect to see a heightened level of activity in this fund in the near term due to its exposure across several Latin American countries that are now in some cases, in the daily market headlines (Brazil 54.95%, Mexico 27.13%, Chile 10.79%, Colombia 3.13% and Peru 2.48%).

Missing from this list is Argentina which has been exceptionally active in 2014 as well, and we are watching ARGT (Global X FTSE Argentina 20, Expense Ratio 0.75%) which has traded a multiple of its typical daily volume this week during every trading session on a steep sell-off.

iShares Latin American 40 ETF

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