Emerging market debt ETF flows come back “en masse”

Positive economic data from emerging markets has driven flows to the region’s bond exchange-traded funds (ETFs).

Data from IIF Portfolio Tracker, quoted by State Street’s SPDR ETF business, for June and July showed $5.7 billion (€5.1 billion) flowed into emerging market debt ETFs domiciled in Europe, Middle East and Africa year-to-date.

Antoine Lesné, a head of strategy and research at SPDR ETF, said this “may have signalled that the time is right to go back to the emerging world”.

There is a striking difference in yield between emerging markets and developed markets, Lesné said, even after adjusting for inflation.

Lesné said that after a prolonged downturn during most of last year, emerging markets purchasing managers' data had been recovering lately and that after the China-induced weakness last year and a challenging start of the year, international investor flows into emerging markets have come back “en masse”.

“Overall, China remains a potential dampener of appetites, but the danger has not awakened yet and there is currently little reason for the tide to turn in the weeks ahead.”

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