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Emerging Markets ETFs Bracing for Larger Pullback?

Wednesday, October 12, 2016 10:09
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Emerging MarketsThere have been mixed flows in prominent Emerging Markets Equity ETFs on weakness in the underlying markets recently. Let’s examine the moves and some potential ways to play them.

The second largest fund in the space, iShares MSCI Emerging Markets Index ETF (NYSE:EEM) (Expense Ratio 0.67%, $31.7 billion in AUM) has seen flat asset growth in the month of October thus far, along with action in the November $36.50 puts.


On the other hand, VWO (Vanguard FTSE Emerging Markets, Expense Ratio 0.15%, $44.1 billion in AUM) has seen some mild inflows on the sell-off in Emerging Markets, pulling in more than $400 million lately thanks to creation activity. The third largest fund in the space, IEMG (iShares Core MSCI Emerging Markets, Expense Ratio 0.18%, $17.8 billion in AUM) has attracted about $380 million this week.

From there, we see a rather steep drop-off in terms of assets under management following these three giants in the Emerging Markets Equity space, as these are likely the favorites of central banks whom trade these markets as well.

Given the rocky two days we have seen in Emerging Markets this week, EEMV (iShares MSCI Emerging Markets Minimum Volatility, Expense Ratio 0.25%, $4.4 billion in AUM) also may be worth a look in terms of catching additional trading interest here, and this fund happens to be the fourth largest fund in the space in terms of assets under management.

Since trepidation seems to be creeping into the space heading into year’s end, particularly on weakness in China, it makes a lot of sense to keep “Bear” and “Levered Bear” products on the brain as they may see upticks in activity if there is any prolonged correction in the EM space. These funds include the likes of EUM (ProShares Short MSCI Emerging Markets, 0.95%, $208 million in AUM), EDZ (Direxion Daily Emerging Markets Bear 3X, Expense Ratio 0.95%, $134 million in AUM) and EEV (ProShares UltraShort MSCI Emerging Markets, Expense Ratio 0.95%, $38 million in AUM).

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.

Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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