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Investors Taking Profits in Emerging Markets, China ETFs


We have pointed out pressure in the Emerging Markets space after a strong run in related equities since the middle of last November in terms of increased evidence of institutional hedging/bearish speculation via puts in related ETFs.

Both EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) and VWO (Vanguard Emerging Markets, Expense Ratio 0.20%) have seen increased options activity in recent sessions mostly involving downside put buying in near term “spring” options.

This morning, a major country weighting in the EM space, China is reacting to the release of HSBC Flash PMI numbers, and as iShares has recently noted, China’s PMI has been above the “expansionary” 50 handle for three straight months now.

FXI (iShares FTSE China 25, Expense Ratio 0.72%) we note has seen more than $400 million leave the fund in recent sessions via redemption activity, is the largest “China” equity based ETF in the landscape, with over $8.3 billion in assets under management.

However, another iShares ETF devoted to China exposure seems to be the recipient of at least some of these outflows in FXI, as MCHI (iShares MSCI China Index, Expense Ratio 0.61%) has reeled in more than $400 million YTD, bringing it over the $1 billion in AUM mark.

For broad China equity exposure, GXC (SPDR S&P China, Expense Ratio 0.59%) also often comes up in conversation, and this particular fund has pulled in a bit over $120 million in assets year to date, ranking it number three behind FXI and MCHI in terms of China (ex-Hong) ETFs in terms of AUM levels.

With China as a country weighing in at 19.14% and 17.90% in EEM and VWO respectively, the near term direction in the broader EM space as well as China specific ETFs deserves close attention going into the spring, especially as price action and recent bearish looking options activity has expressed caution.

iShares MSCI China Index


For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.