Robert Kapito, co-founder and president of BlackRock (BLK), the world’s largest asset manager, says the recent downturn in emerging markets could offer good value opportunities for long-term investors. The comments were made in an interview with Bloomberg Television during Tuesday’s Asian trading session. BlackRock is also the parent company of iShares, the world’s largest ETF issuer.
“The emerging markets are going to account for about 60 to 65 percent of the world’s growth over the next 20 years,” said Kapito in the interview. “If you are investing for the long term, this is a good opportunity to get reinvested into the emerging markets.
Emerging markets equities have struggled this year due to an array of factors, including slowing economic growth, tumbling currencies, widening account deficits in some markets and fears that the Federal Reserve will cut off its easy money spigot when it tapers its quantitative easing program. The Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM) , the two largest emerging markets ETFs by assets, have been among the worst hit by outflows. [Taper Talk Pummels Local Currency Bond ETFs]
Exchange data show foreign institutions pulled $8.4 billion from Indonesian, Korean and Thai stocks this year amid signs of slowing regional economic growth, Bloomberg reported. Last week, Goldman Sachs pared its views on Indonesia to underweight from marketweight and its outlook on Thailand to marketweight from overweight. [Thailand ETF Could be hit by Goldman Downgrade]
ETFs that invest in emerging market equities saw net outflows of $3.5 billion in August on Fed tapering talk, according to BlackRock. Investors have pulled $11.1 billion from emerging market stock ETFs year to date. Still there are signs Kapito’s call may be a prescient one. VWO and EEM have rallied over the past week, helped by contributions from Chinese and Brazilian stocks, among others.
The iShares MSCI Brazil Capped ETF (EWZ) has surged almost 9% in the past five days, including a 3.6% pop Monday on volume that was better than twice the daily average.
“I just think it’s a little bit of an overdone situation on the downside,” Kapito told Bloomberg regarding emerging markets weakness. “You are starting to see movements back in.”
iShares MSCI Brazil Capped ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EEM.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.