U.S. Markets closed

EM ETFs Experience Heavy Redemptions in Risk-Off Environment


In just a little over a month this year, asset outflows in emerging market exchange traded funds have already outpaced redemptions for all of 2013 as slow growth and currency concerns instigated a global sell-off.

The Vanguard FTSE Emerging Markets ETF (VWO) and iShares MSCI Emerging Markets ETF (EEM) , the two largest emerging market ETFs, have experienced combined outflows of about $10.2 billion year-to-date, according to ETF.com. [Emerging Markets Outflows: Worse Before it Gets Better]

According to EPFR, for the week ended Feb. 5, emerging market equity funds lost $6.4 billion after a $6.3 billion outflow in the week prior, reports Robert Minto for Financial Times. [A January to Forget: ETFs Lose Almost $10 Billion]

Investors dumped about $18.6 billion in emerging market equities so far this year, compared to $15.3 billion in outflows for all of 2013.

“The outflows are not good news and from a macro perspective will have negative EM consequences by weighing on currencies, credit extension and ultimately the ability to consume,” analysts at Barclays told FT.

Bond funds saw almost $2 billion in outflows this week, compared to $900 million in outflows the week prior. However, in the ETF space, Treasury bond ETFs are attracting safe-haven investors, with the iShares 1-3 Year Treasury Bond ETF (SHY) bringing in $3.7 billion in assets. [Bond ETFs See Best Start Since ’08]

U.S. equity funds have been the least favorite asset as investors sold $8.6 billion in SPDR S&P 500 ETF (SPY) over the past week.

For more information on developing economies, visit our emerging markets category.

Max Chen contributed to this article.

For full disclosure, Tom Lydon’s clients own shares of SPY.

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.