Some of this year's top asset-gathering exchange-traded funds are emerging markets funds, indicating investors are increasingly comfortable revisiting once disappointing developing markets equities. There are, however, additional data points that suggest investors are bullish on emerging markets stocks and ETFs.
In its most recent Emerging Markets Investor Sentiment Survey, ETF issuer Columbia Threadneedle Investments notes investor sentiment toward emerging markets is overwhelmingly positive with the survey “score of 850 out of 1000 indicates that investors clearly have a positive outlook for emerging markets over the next 12 months. In fact, sentiment is up 35 percent from Q4 2016 and 72 percent from Q4 2015,” according to a statement.
Columbia Threadneedle issues some well-known emerging markets ETFs, including the Columbia Emerging Markets Consumer ETF (NYSE: ECON) and the Columbia India Consumer ETF (NYSE: INCO), one of this year's best-performing single-country emerging markets funds.
Investors Are Bullish
Columbia Threadneedle's survey indicates asset allocators are increasingly bullish on emerging markets stocks, a view that makes sense with the MSCI Emerging Markets Index up more than 26 percent year to date, or more than double the almost 12 percent returned by the S&P 500.
“The majority (72 percent) of survey respondents have a positive outlook for emerging markets equities over the next 12 months, a significant shift both from Q4 2016 when 45 percent of respondents had a positive outlook and Q4 2015 when only 26 percent of respondents felt this way,” said the fund issuer. “One quarter of respondents have a neutral outlook and only 3 percent have a negative outlook for emerging markets in the next 12 months. As the sentiment among respondents has shifted, so have allocation expectations.”
Not A Crowded Trade
A favored battle cry on Wall Street is that many hot trades are also crowded trades, but after years of investors ignoring emerging markets, it is fair to say this trade is far from crowded.
“While current emerging markets allocation levels are between 1 and 10 percent (69 percent of respondents), advisors and investment professionals surveyed are trending toward higher allocations,” said Columbia Threadneedle. “For example, 36 percent of respondents have a higher EM allocation than they did 12 months ago and 58 percent expect to increase their EM allocation over the course of the next 12 months. Only 4 percent of respondents have a lower allocation today than 12 months ago and 3 percent expect to lower their allocation in the coming 12 month period.”
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