Emerging Market ETFs Experience Reversal of Outflows as India Shines

Emerging Market ETFs Experience Reversal of Outflows as India Shines

VoM News Desk | October 17, 2023 | 10:26 AM IST | Breaking News | Follow on Google News

Emerging Market ETFs Experience Reversal of Outflows as India Shines

Emerging Market ETFs Experience Reversal of Outflows as India Shines

Over the past five weeks, exchange-traded funds (ETFs) tracking emerging markets have faced a consistent outflow, totaling nearly $5 billion, as reported by Bloomberg. Nevertheless, there is now a recent positive shift as investors display a cautious interest in specific areas.

Inflows into United States-Listed Emerging Market ETFs

For the week ending on October 13, there was a noteworthy turnaround as inflows into United States-listed emerging market ETFs, covering both developing nations and specific countries, reached $228 million. This marks a significant improvement from the previous week, which suffered losses amounting to $3.1 billion, according to data compiled by Bloomberg.

India Shines as a Bright Spot

India emerged as a standout with the largest inflow of $132.5 million, primarily driven by the WisdomTree India Earnings Fund. Despite the turbulence affecting developing nations this year, risk traders continue to highlight India’s resilience. As the fastest-growing major economy, it remains steadfast. The diminishing growth engine status of China has led investors to seek regions with robust growth or significant stimulus potential. Malcolm Dorson, head of emerging-market strategy at Global X, noted that India appears well-positioned to benefit from steady long-term tailwinds, citing its attractive demographics, unique supply and demand dynamics, high barriers to entry, and a stable democracy. The report further indicated that financial markets are growing more comfortable with the likelihood of Prime Minister Narendra Modi’s re-election next year, which is seen as a key factor contributing to the continuity of economic and fiscal policies.

ETF Flows Under Scrutiny

In early October, ETFs monitoring emerging markets experienced their most substantial weekly outflow in over a year as traders adopted a cautious approach towards risky assets. Concerns about enduring higher interest rates in the US, coupled with ongoing conflict in the Middle East, heightened investor apprehensions. Last week, Saudi Arabia witnessed the most significant outflow among developing nations, totaling $74.3 million, with withdrawals primarily from iShares MSCI Saudi Arabia. Investors are closely monitoring the evolving situation as the United States and its allies diplomatically work to prevent the escalation of conflict across the broader region.

Latest Data

In the current year, total inflows reached $7.14 billion. Stock ETFs saw an increase of $256.7 million, while bond funds experienced a decrease of $28.7 million. The overall assets climbed to $294.6 billion, up from $292.5 billion, according to Bloomberg. The MSCI Emerging Markets Index concluded the week with a 1.5 percent gain, reaching 951.31 points.

VoM News Desk

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