(Bloomberg) -- Money managers piling into emerging-market funds on bets of a Federal Reserve rate cut as soon as next month are staying away from China because of concerns about its economy.
The $15.9 billion iShares MSCI Emerging Markets Ex-China ETF, known by its ticker EMXC, garnered about $352 million for the week ended Aug. 16. EMXC remains the leader among emerging-market ETF inflows this year, raking in more than $5 billion, according to data compiled by Bloomberg.
Emerging-market assets rallied last week on wagers that the Fed would start lowering borrowing costs as early as September. These expectations translate into a risk-on environment, which propels not only stocks, but growth in emerging markets in particular, said Malcolm Dorson, senior portfolio manager for Global X Active India ETF (NDIA) and Global X EM ex-China ETF (EMM).
Despite the appetite for risk, ETF investors have been echewing China after it moved to obsure information about overseas flows into and out of its stock market. Concerns about the growth of China’s economy also hurt sentiment.
“Individual headlines like this accumulate and begin moving the needle for allocators deciding whether or not they need any China exposure,” Dorson said. “Recent economic data out of China has also underwhelmed and we’re not seeing enough stimulus to adjust momentum yet, but EM countries outside of China look like they might have just turned an important corner.”
On the other hand, Taiwan has been a beneficiary of the artifical intelligence boom, boosted by investors looking to gain exposure into Taiwan Semiconductor Manufacturing Co Ltd. The stock is up 66% so far this year on the back of excitment over technology companies and the growing demand for AI. For the past week, Taiwan had the biggest inflow — of $143 million — led by EMXC.
Inflows to US-listed emerging-market ETFs that invest across developing nations — as well as those that target specific countries — totaled $19.6 million in the week ended Aug. 16, according to data compiled by Bloomberg. That’s compared with an exodus $2.7 billion in the prior week. So far this year, inflows have totalled $2.98 billion.
- Stock ETFs contracted by $23 million.
- Bond funds rose by $42.6 million.
- Total assets rose to $347.7 billion from $339.3 billion.
- The MSCI Emerging Markets Index closed up 2.8% from the previous week at 1,093.65 points.
- Taiwan had the biggest inflow, of $143 million, led by iShares MSCI Emerging Markets ex China.
- China/Hong Kong had the biggest outflow, of $178 million, following withdrawals from iShares China Large-Cap.
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Following are tables detailing net flows for emerging-market ETFs in US dollars. The data include the holdings-weighted allocations from multi-country funds, as well as country-specific funds. Latest and historic flows are allocated using latest fund weightings (figures in USD millions unless otherwise stated):
Regional Summary
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Americas
Asia Pacific
Europe, Middle East & Africa
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