Q&A: WallachBeth ETF Specialist On Where Investors Are Putting Their Money
By Shuli Ren
Barron’s: Where are people investing their money?
Bajaj: Investors are moving out of traditional “safe havens” of treasuries and into higher-yielding emerging markets equities and especially debt.
Since July 1, the iShares MSCI Emerging Markets ETF (EEM) saw money inflow equivalent to 20% of the total assets under management, or $4.8 billion.
The iShares Core MSCI Emerging Markets ETF (IEMG) saw another $1.7 billion inflow, or 13% of the total assets under management.
These are substantial amounts.
Barron’s: So investors are finally coming to view emerging markets positively?
Bajaj: I would not say so. Unlike last summer, trading volume this year is very light and many investors are just watching how things play out more than anything else. Everything is trickling higher, which is not normal. In the past, when stock markets went up, bond markets would fall.
I think some investors are just riding the tailwinds from a rally in commodities, and emerging markets stocks and bonds happen to be correlated risk assets.
For instance, we see more inflows into the iShares JP Morgan USD Emerging Markets Bond ETF (EMB), which has more commodity exposure, than the Powershares Emerging Markets Sovereign Debt Portfolio (PCY).
Barron’s: Since Brexit, Asian markets have seen a nice rebound. Do you see profit-taking?
Bajaj: Yes, in the last few days, we saw sizable fund redemption in Japan’s iShares MSCI Japan ETF (EWJ) and WisdomTree Japan Hedged Equity Fund (DXJ). Investors seem unconvinced Kuroda and Abe’s economic stimulus can push Japan stocks higher.
We also saw profit taking in the iShares MSCI Australia ETF (EWA). Investors may consider the Australian dollar’s strength played out.
Barron’s: How about China?
Bajaj: Investor sentiment remains poor. Even though the iShares MSCI China ETF (MCHI) has risen 13% since Brexit, we have not seen investors pouring money into this ETF. They are still apprehensive of China because of the stock market turmoil last summer and this January.
Year-to-date, the Deutsche X-Trackers Harvest CSI 300 China A-shares Fund (ASHR) is still down 12%, whereas the rest of the world pretty much have at least broken even.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... eir-money/