TrimTabs: Oct. Big Month For Emerging ETFs

November 08, 2011

A look at the ETF market suggests investors are again open to emerging markets investments. But will it last?

ETF investors poured money into the emerging markets last month, and year-to-date losses on the asset classes were cut in half in the return to risk last month. Emerging market ETFs erased more than half of their year-to-date losses in just the past month, according to New York-based financial research firm TrimTabs.

Emerging markets ETFs raked in more than $5 billion in October, according to TrimTabs. Those observations are consistent with data compiled by IndexUniverse showing that in October, investors plowed $3.77 billion into the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), making it the month’s most popular ETF. They also added $1.17 billion to the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO).

“The flow data we track daily shows that emerging markets ETFs raked in $5.1 billion in the past four weeks,” Leon Mirochnik, a research analyst at TrimTabs, said in a press release. “Performance has proven impressive. Some emerging markets ETFs returned as much as 19 percent in less than a month.”

Whether monthly gains signify a sustainable rally in the current “risk-on/risk-off” investing environment remains to be seen. The eurozone’s debt troubles, now centering on Italy, could lead investors to get out of equities. But for now, both EEM and VWO are up by about 15 percent since Oct. 3, according to data posted on Google Finance.

October’s gains erased some of the staggering losses that emerging markets ETFs have suffered in the past year. As of Sept. 30, emerging markets year-to-date returns were -26 percent, but by the end of October, they had cut their year-to-date losses nearly in half, to 13.9 percent.

Mirochnik’s close examination of the ETF market to gauge market sentiment is yet another sign of what ConvergEx Group Chief Market Strategist Nicholas Colas has called the “ETF Ecosystem”—namely an incisive tool with which to understand how financial markets are operating.



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