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Emerging Markets See Inflows Rise on Government Initiatives

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Inflows rise

During the week ended January 22, 2016, emerging market equities (EEM) saw total inflows of $176 million compared to $110 million during the previous week.

Investors deployed funds in emerging markets such as China and India due to attractive valuations and proactive government initiatives.

Some select markets are currently priced at lower valuations, but investors are looking for signs of recovery before deploying funds. China’s manufacturing contraction is expected to stabilize in 2H16 if strong growth in retail can be realized and if services can attract investments for the next phase. Overall, China and India are poised to attract funds over the long run on their fundamentals.

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Investments in emerging markets account for ~12% of worldwide investments in mutual funds and ETFs. Emerging economy offerings from mutual funds and ETFs are expected to rise in the upcoming quarters. Reform initiatives by major countries to further open economies, remove currency restrictions, and deploy funds are helping emerging market economies to attract more funds.

Emerging market ETFs

Meanwhile, asset managers have increased their offerings of ETFs that include emerging market equities and debt. Asset managers including BlackRock (BLK), JPMorgan Chase (JPM), State Street (STT), and Deutsche Bank (DB) now offer investment products in emerging markets. Net investments for ETFs linked to emerging economies should rise in the future.

Major ETFs such as the iShares Core MSCI Emerging Markets ETF (IEMG), the iShares MSCI Emerging Markets ETF (EEM), the WisdomTree India Earnings ETF (EPI), the iShares MSCI India ETF (INDA), and the iShares MSCI Emerging Markets Minimum Volatility ETF (EEMV) all saw outflows totaling $1,445 million during the week ended January 22, 2016.

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