Emerging Markets Flows Are Back, Have You Bought Your ETFs Yet? (EEM, FXI, EWZ, EWY, RSX, INDY)
Tim Seymour: Record amounts of money are coming back into emerging markets ETFs and mutual funds after massive outflows last year. The biggest funds — like the Emerging Markets ETF (NYSEArca:EEM) — are reaping the biggest rewards.
According to Jonathan Garner, chief emerging markets strategist at Morgan Stanley, emerging markets funds took in $5.8 billion last week, making it the biggest since the rally of October. At this point, we have seen a net $10.3 billion in subscriptions over the last three weeks.
As yet, regional funds have failed to join the party, with at best “marginal” incoming flows. Those focused on specific countries have fared much better, with Chinese funds like iShares FTSE China 25 Index Fund (NYSEArca:FXI) gaining a net $1.23 billion, Brazil funds like iShares MSCI Brazil Index (NYSEArca:EWZ) up around $1 billion and Korea and Russia — represented by iShares MSCI South Korea (NYSEArca:EWY) and Market Vectors Russia ETF (NYSEArca:RSX), respectively — each gaining $500 million to $700 million just in the last week.
Indian funds like iShares S&P India Nifty 50 Index Fund (NYSEArca:INDY) have also gained well over $1 billion in new money since the start of the year.
This is the strongest run to China since before the 2008 credit crunch. So far, most of the new money has come into ETFs, which is a strong sign of more to come — traditionally flows show up in new ETF allocations first and then trickle down into the more staid mutual fund universe.
And there is still a long way to go. We are still 11% below the $749 billion that these funds represented at their peak and a full 64% of last year’s outflows have yet to be recovered.
So far, the hot sectors are banks, energy and materials.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.