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Emerging Markets ETFs Stung by Outflows


August 2013 will go down as a bad month for ETF outflows. How bad? August was the worst month for ETF outflows since January 2010. Preliminary data from BlackRock (BLK), the parent company of iShares, the world’s largest ETF sponsor, indicate that as of August 29 investors pulled $16.1 billion from ETFs last month. That compares with $17.1 billion in redemptions seen in January 2010.

Last month, the S&P 500 lost 2.6% while the Dow Jones Industrial Average shed 4% in what was the worst month for U.S. stocks since May 2012. Those statistics highlight investors’ August skittishness and explain why money has departed from ETFs. Emerging markets ETFs were particularly hard-hit by outflows last month. [Stock ETFs Take Worst Monthly Loss in Over a Year]

In the last week of August, $3.9 billion was pulled from emerging markets ETFs, more than double the $1.7 billion that was withdrawn in the previous week, according to Barclays data. Of that $3.9 billion, $1.83 billion was pulled from ETFs with a focus on Asia, nearly $1 billion more than was pulled from those funds in the prior week, the data indicate.

Asia ETFs include those funds that offer exposure to battered equity markets such as those in India and Indonesia. Only recently have there been signs that foreign investors are pulling money from Indian equities, but major India ETFs have pulled a fair amount of capital from India ETFs since late May. [India Fund Flows Tell Diverging Stories]

Indonesia, like India, is struggling with a faltering currency and widening current account deficit. Three Indonesia ETFs, including the Market Vectors Indonesia ETF (IDX) and the iShares MSCI Indonesia Investable Market ETF (EIDO) , were among August’s worst-performing non-leveraged ETFs. [Indonesia ETFs Lead Global Sell-Off]

Last week, global emerging markets ETFs (GEMs) lost $1.44 billion while funds with a bias toward Latin America saw redemptions of $310 million, according to the Barclays data. The iShares MSCI Mexcio ETF (EWW) was the worst-performing non-leveraged LatAm ETF last month with a loss of nearly 9%.

The Barclays data show over $2 billion was pulled from emerging markets bonds ETFs during the last week of August, up from $1.3 billion in the prior week. The Market Vectors EM Local Currency Bond ETF (EMLC) lost 3.43% in August.

Market Vectors Indonesia ETF

ETF Trends editorial team contributed to this post.

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.