Mid-May Outflow from Emerging Market Equities Due to Fundamentals
Asset managers such as JPMorgan Chase (JPM) and Deutsche Bank AG (DB) have increased their offerings of ETFs covering emerging market equities and debt.
Currently, emerging market equities are trading at 11.4x on a one-year forward earnings basis. The valuations declined by 0.43% in the week ending May 22, 2015.
In the past, major emerging market equities, including China and India, have increased on the basis of reforms intended to help growth.
Major ETFs attracting investments include the iShares Europe ETF (IEV), the SPDR Euro STOXX 50 ETF (FEZ), and the WisdomTree Europe Hedged Equity Fund (HEDJ).
Macro data from the European Union reports a slowdown in economic momentum. The Markit Eurozone purchasing managers’ index declined from 53.9 to 53.4 in the month of May.
EU equities outperformed other major markets in 2015 due to quantitative easing announced by the European Central Bank, a weaker currency, and rising exports.
US equities (SPX) witnessed net investment outflow for the ninth straight week. Total outflow in the week ending May 22, 2015, stood at $1.8 billion—lower than the previous week’s $2.2 billion.
Valuations were helped along by a marginal increase of 10,000 new US jobless claims, which kept the jobless rate near a 15-year low.
US equities (SPY) advanced alongside European equities (EFA). Meanwhile, emerging market equities (EEM) declined in the week ending May 22, 2015.
The demand for residential loans at banks is influenced by a large number of factors, many of which are interrelated.
With homeownership on the decline, demand for rental housing is rising. The vacancy rate for rented homes in the US fell to 7.1% in the first quarter of 2015.
Manufacturing index The manufacturing PMI (purchasing managers index) for April was released on May 1, 2015. Readings were unchanged from March’s 51.5% level. April was the 28th month in a row that…
According to the latest data released by the Federal Reserve on May 22, 2015, commercial and industrial loans for all US commercial banks increased by 11.8% in the week ending May 13, 2015.
A surge in housing starts should translate into higher loan demand to buy these houses. This should drive loan growth at banks in the residential real estate segment.
Mortgage applications for home purchases are a leading indicator of home sales. The decline was driven by a rise in fixed 30-year mortgage rates.
A rise in capacity use indicates higher demand for goods, and has been historically associated with higher inflation.
The financial sector could see earnings growth as interest rates rise. As interest rates increase, the NIM (net interest margin) would gradually increase.
Investments in emerging markets form ~12% of worldwide investments in terms of mutual funds and ETFs, and this number is expected to increase.
The weak data forced policymakers to roll out stimulus measures to revive China’s real estate sector. These include boosts for bank lending and lower down payments for property buyers.
Indian equities snapped their losses of 2015 in the last several weeks, as the country is taking firm steps toward reforms.
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