Emerging ETFs Snap Winning Streak as Tariffs Weigh on Inflows
Outflows from US-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.11 billion in the week ended Aug. 1, compared with gains of $2.36 billion in the previous week, according to data compiled by Bloomberg.
India led the reversal in flows, losing $298.2 million last week following withdrawals of $607 million from iShares MSCI Emerging Markets ex China. The almost $10 billion iShares MSCI India ETF recorded outflows of $21 million, marking the first weekly drop since April.
This comes after Trump hit the South Asian nation with a 25% tariff last week, threatening additional penalties for its oil and military purchases from Russia. He criticized India for being a member of the 10-nation BRICS bloc, which he described as anti-US, and referred to both India and Russia as 'dead economies.' The MSCI India ETF dropped further on Monday after Trump announced 'substantially' higher tariffs on India. He didn't say how big the increase would be.
'Investor concerns about higher US tariffs on India and other emerging markets led to redemptions,' said Todd Rosenbluth, head of research at TMX VettaFi. 'The risks of owning exposure to emerging markets has increased and for many is too much to stomach.'
An official in New Delhi told Bloomberg News on Friday that the nation expects US trade negotiators to visit the country later this month to continue talks on a bilateral deal. The comment came before Trump's latest threat to hike the tariffs still further.
India's currency, the rupee, is expected to remain one of Asia's worst performers in the second half of the year, with analysts at Deutsche Bank AG and Barclays Plc forecasting the currency will drop to new record lows by the year-end amid muted foreign inflows and headwinds from US tariffs.
'In the near term, the 'handshake' nature of trade deals agreed so far means that tensions could resurface as the details are negotiated. Friday's punitive tariffs on a range of nations — including Switzerland — mean further urgent discussions lie ahead,' according to Ulrike Hoffmann-Burchardi, CIO Americas and global head of equities at UBS Global Wealth Management.
Note: Figures are calculated by country weight using flows to US-listed ETFs. Bloomberg updated the screening criteria in November 2024. Use Bloomberg screening tools to create custom filters.
Click here for Bloomberg's ETF screening applications.
Click here for BI's Weekly Emerging Markets Fixed-Income Strategy Chart Pack
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):
Click here for Bloomberg's ETF Excel library.
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