Greenwood Trading – Outflows from emerging market ETFs in response to financial crises, geo-politics and fears of US interest rate increases have reversed.
According to Greenwood Trading, The rout in emerging markets assets, particularly those held and favored by large exchange-traded funds, appears to be over according to China-headquartered broker-dealer and investment house, Greenwood Trading.
Goran Nurovic, senior EM analyst at Greenwood Trading said, “The solid and sustained outflow that began as the US Federal Reserve began its tapering of monetary stimulus and persisted as tensions in Ukraine, Turkey mounted and the threat of a default by Argentina has finally reversed. Investors are confident that interest rates won’t rise in the US for some time to come so they feel safe chasing return again in the emerging markets.”
Funds flowing into the ETFs turned positive for the year by just under $110 million after outflows topped out at $13.9 billion in the first 2.5 months of 2014. Tensions over the Middle East and between Ukraine and the Russian Federation remain high and could yet prove destabilizing for ETFs with exposure to companies and assets in those regions.
With the result of the general election in Indonesia more or less finalized and stimulus measures being announced by governments from India to Thailand, Greenwood Trading says it sees sentiment towards the emerging markets improving noticeably.
“There are most certainly good reasons to be optimistic but it’s important to keep a close eye on developments in the flashpoints around the world. There is undoubtedly plenty of upside potential considering the drubbing the emerging markets received at the height of the fund outflows but clearly, the situations in Ukraine and the Middle East remain as fluid and unpredictable on the ground as ever,” said Mr. Nurovic.
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