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Emerging Markets ETFs Hit by November Outflows


A rocky 2013 for emerging markets exchange traded funds in terms of investor redemptions continued in November with diversified funds tracking developing world economies witnessing $3.6 billion of outflows last month, according to monthly flows data from BlackRock (BLK).

“The majority of net redemptions were attributable to the impact of Fed uncertainty on broad market ETPs. However, the outflows were halted toward the end of the month after a meeting of top Chinese officials to discuss social and market reforms aimed at boosting the country’s economic growth was well received,” said BlackRock. [November ETF Inflows Not Spectacular, but Decent]

Bolstered by Beijing’s reform-minded approach to improving the world’s second-largest economy, China-specific ETFs saw a combined $1.2 billion of inflow last month. The iShares China Large Cap (FXI) accounted for $122 million of that total while the Guggenheim China Small-Cap ETF (HAO) had November inflows of almost $29 million. [Beijing Reforms Boost China ETFs]

In terms of market-specific outflows, “Brazil, which saw outflows of ($0.7bn), has been out of favor this year while Korea, where outflows totaled ($0.8bn), has not,” said BlackRock.

Investors rushed into South Korean stocks due to cheap valuations and the market’s reputation for being one of the steadier hands in the emerging world.  A strong won and a current account surplus at a time when some more volatile emerging markets are dealing with account deficits have also increased the allure of South Korean equities and the iShares MSCI South Korea Capped ETF (EWY) . [South Korea ETFs Have Room to Run]

India, Mexico and South Korea are among the individual emerging markets that have garnered net inflows this year, but even with $1.2 billion of inflows last month, China joins Brazil and Russia among the developing markets that are still contending with year-to-date outflows.

Of the 10 worst ETFs in terms of 2013 outflows, five are emerging markets funds, including FXI and the iShares MSCI Brazil Capped ETF (EWZ) , according to BlackRock data.

Worst ETFs for 2013 Outflows

Chart Courtesy: BlackRock