Emerging Market ETFs See First Outflow in 22 Weeks on China

JOHANNESBURG (Capital Markets in Africa) – Investors pulled money from emerging-market ETFs last week for the first time since October as disappointing data from China, the world’s second-largest economy, crimped the outlook for growth across Asia.

After 21 weeks of inflows, money managers withdrew $108.6 million from U.S.-listed exchange-trade funds that invest across developing nations as well as those that target specific countries, according to data compiled by Bloomberg. The withdrawal trimmed this year’s inflows to $18.3 billion.

The move was driven by Asian funds as weaker-than-expected industrial production damped the outlook for growth in China and soured the mood for countries that depend on trade with the Asian giant. The $3.3 billion iShares MSCI Taiwan ETF suffered its biggest outflow since early 2016 and the $430 million iShares MSCI Thailand ETF had the largest withdrawal in 10 months.

“Slower China growth and a stabilizing dollar have maybe slowed down some momentum,” said Mohit Bajaj, director of ETFs at WallachBeth Capital in Jersey City. He is “fairly neutral” on global economic growth, with nothing in sight to act as a catalyst.

There’s also been a shift toward developed-nation stocks, said Andy Wester, a senior investment analyst at Proficio Capital Partners in Newton, Massachusetts.

“It’s the classic performance-chasing,” Wester said. Emerging markets outperformed at the end of last year, “then, as soon as EM starts underperforming, money starts flowing out.”

The iShares Core MSCI EAFE ETF, or IEFA, which invests in developed markets, has climbed more than 11 percent this year, while the iShares Core MSCI Emerging Markets ETF, or IEMG, has gained about 10 percent. Buyers have noticed. IEFA took in more than $1 billion for the week ending March 15, the largest week of inflows for the fund since April 2018.

Following are tables detailing net flows for emerging-market ETFs in U.S. dollars. The data include the holdings-weighted allocations from multi-country funds, as well as country-specific funds(figures in USD millions unless otherwise stated):

Source: Bloomberg Business News