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Emerging Market ETF Volatility Bumps Higher on Oil Weakness


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


Full disclosure: Tom Lydon’s clients own EEM.

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