Stocks, particularly in emerging markets
(EMs), are witnessing a surge in passive flows.
Last week, inflows into the US-listed EM exchange traded funds (ETFs) were more than $1 billion for the second consecutive week. According to Bloomberg data, investors poured in $1.06 billion into EM ETFs, which invests in developing countries including India. In the previous week, flows stood at $1.06 billion.
Flows for the week ended November 8 were most since February 22 — also the fifth straight week of inflows.
The positive flows have boosted the performance of EMs. The MSCI EM index has gained as much as 9 per cent since October 1, only to give up some of its gains over the past few sessions.
Analysts say optimism around a trade deal between the US and China has boosted risk sentiment. However, renewed uncertainty triggered by US President Donald Trump’s threat of further tariff hikes on Chinese imports has weighed on EM performance.
Weak performance of the Chinese and Hong Kong markets, which have the biggest weight in the EM index, has also affected the index.
However, Chinese and Hong Kong equities have been the biggest beneficiaries of the surge in ETF flows.
Stocks belonging to these two countries cornered a third of the EM ETF flows.
India got a miniscule portion of the ETF flows at just $36 million. However, total foreign flows into domestic equities for the week ended November 8 stood at $1.1 billion. Analysts said the bulk of these flows were on account of strategic investments
made by overseas investors.
Among individual ETFs, BlackRock’s $27-billion iShares MSCI Emerging Markets
ETF received $354 million, the biggest inflow since February. Its bonds counterpart, the $14.9-billion iShares JP Morgan USD Emerging Markets
Bond ETF had a $326-million inflow.