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George Ma
May 20 15:06

Investors continue to sell EM assets after U.S.-China conflict escalation

Investors have been selling stocks and bonds of developing countries for 13 consecutive weeks, the total outflow of funds from the respective ETFs for this period reached $21.9 billion.
In the week leading up to May 15, investors continued selling EM (emerging markets) assets amid conflict escalation between the US and China. During the period under review, capital outflows from US traded ETFs amounted to US$1.02bn (US$887.3bn from equity funds and US$134 mln from bond funds, according to Bloomberg data.
By regions, the capital outflow was distributed as follows:
  • America: -US$426.9 mln;
  • Asia and the Pacific: -US$483.7 million, and Bloomberg: -US$426.9 million.
  • Europe, Middle East and Africa: -US$110.7 million.
A week before May 15, the capital outflow from Russian assets amounted to US$42.3 mln (US$35.2 mln from equity funds and US$7.1 mln from bond funds).
Capital outflows from EM markets declined slightly in the last reporting period, but investors have been selling these assets for 13 consecutive weeks, and the total outflow during this period amounted to US$21.9bn.
In contrast to the previous reporting periods, the largest outflows were recorded not by leading, but secondary ETFs. For example, only US$104 mln was diverted from IEMG (capitalization US$45.2bn) and US$229 mLn from EEM (capitalization US$19.7bn). The capitalization of US$50bn VWO remained almost unchanged, with the remaining outflow of almost US$690mn split between smaller ETFs.
The largest outflow of capital (-US$132 million) was recorded in Brazilian assets amid deteriorating epidemiological situation and political instability in the largest Latin American country. The capitalization of iShares MSCI Brazil ETF has decreased from US$11 billion to US$4 billion since the beginning of the year.