Have Emerging Markets Turned The Corner? – Weekly ETF Fund Flows

| March 31, 2014 | 0 Comments

fund flowsETF outflows outpaced inflows as US stocks drifted lower last week.

Fund flows are a valuable indicator of what traders are thinking.  It takes a lot of buying or selling to drive millions or even billions of dollars into or out of individual ETFs.

Fund flows are something traders use to find trends and gauge investor sentiment.  And it can help you pinpoint which ETFs could be next to make a big move higher or lower.

One ETF that bucked the bearish outflows last week was iShares MSCI Emerging Markets (EEM).  It enjoyed a massive $1.3 billion in net inflows last week.  The strong inflow into EEM could mark a significant change in investor sentiment toward emerging market stocks. 

You see, emerging markets have been outperformed by US stocks over the last year.  And investor sentiment has been extremely bearish as concerns about unstable currencies, inflation, sluggish growth, and political turmoil have weighed on emerging markets. 

But a funny thing happened over the last few months.  Emerging markets are outperforming the S&P 500.

Obviously there are some big risks to investing in emerging markets.  But one thing’s for sure, emerging market stocks are cheap compared to US stocks.

If the US market continues to lose momentum, then we could see asset flows continue to move toward these cheap stocks.

In an interesting turn of events, the Vanguard Dividend Appreciation (VIG) led all ETFs with net outflows of more than $2 billion last week. 

The big outflow comes just one week after VIG experienced a $2.3 billion inflow.

Needless to say, it’s a bit unusual to see such a quick reversal of fortunes for a stable ETF like VIG.  This Vanguard ETF focuses on dividend growth.  And it’s typically favored by investors that hold ETFs longer than a week.

There’s no way to know if the multi-billion dollar inflow and outflow was the same trader or group of traders moving into and back out of VIG in just a few days.  But the unusual inflows point in that direction.

It could be the recently announced changes to the Dividends Achievers Index that VIG tracks.  The index is adding 40 new companies to their list of elite dividend achievers.

The changes will add more stocks from technology and utilities sectors.

It’s likely the outflows were triggered by some investors that didn’t like the new additions to the index. 

That wraps up this week’s ETF fund flows…

Keep in mind, there’s a lot of information about ETF fund flows.  And it can be a very useful tool as long as you know what you’re looking for.

Good Investing,

Corey Williams

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Category: Dividend ETFs, ETFs, Foreign Market ETFs, Market Analysis

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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