Deluge of emerging market ETF flow slows last week, shows data

A deluge of fresh investment into exchange-traded funds (ETFs) that buy emerging market (EM) stocks and bonds slowed last week as the developing asset rally showed signs of fatigue.

US-listed ETFs that invest across developing nations as well as those that target specific countries received $462.3 million in the week ended January 22, compared with gains of $3.55 billion in the previous week, according to data compiled by Bloomberg. It was still the twelfth week of inflows totaling $23.1 billion.

The slowdown came as some investors questioned the recent euphoria in risk assets. Bloomberg’s Fear-Greed indicator for the MSCI developing nation stock gauge, which measures selling strength versus buying strength, has climbed to its highest in almost a decade, a sign that gains may have been excessive. Still, the inauguration of Joe Biden as US president stoked optimism for further coronavirus stimulus. EM equities were headed for another all-time high on Monday.

Shares of the $77 billion Vanguard FTSE Emerging Markets ETF, the largest US-based fund of its kind, reached the highest since 2007 last week. The fund attracted $109.73 million last week, marking an eleventh week of inflows. The iShares Core MSCI Emerging Markets ETF, known as IEMG, meantime, brought in the second-highest inflow last week of $79.44 million, according to Bloomberg data.