Financials Gain As Emerging Markets Lose – Weekly ETF Fund Flows

| May 29, 2013 | 0 Comments

fund flowsToday we’re taking a look at ETF fund flows in – Financial Select Sector SPDR (XLF), iShares MSCI Emerging Markets (EEM), and Vanguard FTSE Emerging Markets (VWO).

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

They’re 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.

Let’s take a look at three ETFs that near the top of the net inflows and net outflows from May 21st to May 28th.

Financial Select Sector SPDR (XLF) has led all ETFs in inflows over the last week.  It added an impressive $735 million in new assets under management.   

XLF tracks stocks in the US financial sector.  It’s up a whopping 51% from the 52-week low and 22% of those gains have come in 2013.   

The inflow of new cash is a clear indication of sector rotation.  Investors are pulling money out of defensive sectors and moving it into cyclical sectors.

What’s more, it appears that financials have finally shaken off the worst of the 2008 credit crisis.  Investors are starting to believe financials could deliver growing profits. 

And don’t forget, XLF is still well below its 2007 peak of over $30 per share.  So there’s plenty of room for this sector to run.    

On the other hand, emerging markets ETFs saw the biggest outflows over the last week.  Investors pulled out over $1 billion from iShares MSCI Emerging Markets (EEM) and Vanguard FTSE Emerging Markets (VWO).

Emerging markets ETFs haven’t had the same bullish momentum as US stocks.  EEM is down 4% so far this year and VWO is right behind with a 3% loss this year.  That’s well below the 17% gain for the S&P 500.

There’s no doubt about it, developed markets are crushing emerging markets this year.

Why?

For one thing, basic materials and commodities have been some of the weakest performing stocks.  And emerging markets are primarily geared toward energy and materials.

What’s more, China’s economy isn’t growing nearly as fast as expected.  So they haven’t needed as many raw materials as expected.  And the absence of voracious Chinese demand has helped keep commodity prices down.

Until China gets its economy cranked up and basic materials stocks get going, emerging market ETFs could continue to struggle.

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: ETFs, Foreign Market ETFs, Market Analysis, Sector ETFs

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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