Emerging market ETF flows buck gloom to make gains

Emerging market equities, which have come under pressure from interest rates and the prospect of a trade war between the US and China, gained just over $3 billion from passive investors globally during August.

Figures from BlackRock show $3.2 billion (€2.7 billion) of new money flowed into exchange-traded products (ETPS) that focus on emerging market equities despite a global backdrop that would normally “dampen demand” for this sector.

Morningstar figures recently showed that in May and June, exchange-traded emerging market equity funds saw $12 billion in outflows, while local currency bonds saw $2 billion in redemptions.

But BlackRock said emerging market equity flows – which would normally be hit by factors such as the stronger dollar and ongoing trade tensions – were benefiting from economic reforms, robust earnings growth and attractive valuations.

However, US equities continued to attract the majority of inflows in August, with ETPs focused on these assets gaining $15.8 billion in new money during the month.

The BlackRock figures, which are for products listed globally, mean US equities have seen five consecutive months of inflows, mainly across large-cap stocks, but with small and medium corporations also benefiting.

Fixed income saw $8 billion of inflows in August, bringing year-to-date flows to $77.9 billion, and despite shedding $8 billion between January and June, high yield corporate bonds gain $1.6 billion.

Gold saw outflows of $1.4 billion, though the World Gold Council and ETF Securities have both said recently that they expect the gold price to recover.

*See our recent report on emerging market ETFs.

©2018 funds europe

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