Investors across the globe are abandoning emerging market equities. Global ETF flow data collated by BlackRock shows that in the month of January emerging markets equity exchange-traded funds saw outflow of $10 billon, the largest monthly outflows on record.
Investors should steal their nerves against emerging market volatility
Fears over weak Chinese manufacturing data and the continuation of Fed tapering their quantitative easing package mean investors are fleeing to the relative safety of developed market equities.
Pan-European equity ETFs in contrast saw inflows of $4 billion last month, according to BlackRock and global developed market funds an additional $3.7 billion.
January was a volatile month for equity investors, as stock markets across the globe got the jitters.
While the emerging markets shrank back after the US stimulus tapering by $10 billion was confirmed, governments sought to boost domestic economies with macro measures.
Turkey is trying to do is stop the flow of money out of the Turkish economy to places like the U.S., which now have slightly higher interest rates, and to try to keep the lira from depreciating any further. Hungary and South Africa took similar measures.
But these were not enough to quash investors’ concerns and last week was the marked the fourteenth week of outflow of from emerging market equity ETFs and the largest weekly outflow seen since August 2010.
However – according to ETF Trends there are two emerging market ETFs that are bucking the outflow trend.
The EGShares Emerging Markets Consumer ETF and the EGShares Emerging Markets Domestic Demand ETF have brought in early $32.6 million combined since the start of 2014.
Russ Koesterich, chief investment strategist for BlackRock said that investors should steal their nerves against emerging market volatility as it is unavoidable.
“Emerging markets tend to be volatile, and they’re likely to remain so, at least in the near term,” he said. “As emerging market currencies remain under pressure, the Federal Reserve tapers and several countries struggle with lingering structural issues, emerging market volatility is likely to remain high in the coming months.”