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Cash Flowing Back to Some EM ETFs


Select diversified emerging markets exchange traded funds have been on a tear after bottoming in late June. For example, the iShares MSCI Emerging Markets ETF (EEM) , the second-largest emerging markets ETF by assets, has jumped 10.2% since July 19.

Investors have been embracing the notion that emerging markets are oversold and that a late 1990s-style developing world financial collapse is not in the cards. The result is cash is returning to some popular ETFs offering exposure to developing world equities.

“For the week ending October 16, capital totaling $1 billion flowed into emerging markets equity funds,” Shuli Ren reports for Barron’s, citing Barclays data.

From October 11 through October 17, some well-known emerging markets ETFs really shined in terms of asset-gathering proficiency. EEM added almost $423 million in inflows while the iShares Core MSCI Emerging Markets ETF (IEMG) , which last week celebrated its first anniversary, hauled in over $50 million. [BlackRock Celebrates 1-Year Anniversary of Core ETFs]

In what may be a sign that investors want dividend compensation for taking on emerging markets risk and/or that low P/E markets are becoming increasingly attractive, the WisdomTree Emerging Markets Equity Income Fund (DEM) raked in $21.4 million in the October 11-17 time frame.

Russia and China, two of the cheapest emerging markets and also two of the developing world’s biggest dividend destinations, combine for almost 37% of DEM’s weight. [These EM ETFs are Gaining Momentum]

Interestingly, the Vanguard FTSE Emerging Markets ETF (VWO) , the largest emerging markets ETF by assets, lost $42.3 million last week.

Emerging markets bond ETFs saw modest inflows as the PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) saw $2.75 million in new cash come in last week. The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), the largest emerging markets bond ETF, saw slight inflows.

iShares Core MSCI Emerging Markets ETF


ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DEM, EEM and EMB.

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.