Delta variant spread weakens flows to emerging-market funds, shows data

Inflows to emerging-market exchange-traded funds (ETFs) slowed last week as the spread of the delta variant and prospects for faster monetary policy tightening dragged on demand for risky assets.

Investors added $190.3 million to US-listed emerging market ETFs that invest across developing nations as well as those that target specific countries in the week ended August 6, compared with gains of $400.2 million in the previous week, according to data compiled by Bloomberg.

It was the smallest addition since funds lost money four weeks ago, in a year that has seen inflows totaling $34.8 billion. Debt funds added $175.7 million last week, while those that invest in stocks received just $14.6 million.

In China, the growth implications of rising Covid infections were tempered by investors buying what’s left of a dip in companies impacted by a regulatory crackdown. The $5.1 billion KraneShares CSI China Internet ETF, or KWEB, recei­ved $211.9 million last week.

The $20.8 billion iShares JP Morgan USD Emerging Markets Bond ETF, or EMB, was another big winner, luring $168.2 million in fresh investment.

Still, its inflows slowed on Friday, when a better-than-expected US payrolls report sparked speculation that the Federal Reserve may accelerate its schedule for tighter monetary policy.

Investors withdrew the most money from Brazil, notably the $1.6 billion iShares Latin America 40 ETF, known as ILF. The fund lost $104.9 million, its biggest outflow since November of 2019.