Global ETF investors return to Emerging Markets

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In July, ETF investors added close to US$35.5BN to ETFs globally, helping to maintain the industry’s close to US$2.6TN in assets under management.

Strong positive flows were seen across the US, Europe and APAC, with Australia based ETFs receiving $368m in flows – improving on last month’s record inflow of $354m.

The increasing escalation in the Ukraine, ongoing tensions in the Middle East, Argentina’s latest default and concerns about the Federal Reserve’s intentions did not deter global ETF investors from investing heavily in equities in July. Of the US$35.5bn invested in ETFs across globe during July, 82% of these flows were to equity-based ETFs in July.

Looking a little deeper into recent trends, we can see that Emerging Market equities have seen a rapid return to favour with ETF investors adding heavily in Emerging Market equities for the 3rd month in a row.  This follows a period of significant outflows from the asset class due to concerns around the evolving political landscape and Chinese reforms concerns.

 

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Unlike their global peers, Australian ETF investors remained cautious on emerging market equities with cash outflows over July the largest over the last 12 months.

 

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While global ETF investors clearly favoured the attractiveness of higher growth emerging economies in recent periods, we expect continued convergence of economic growth from advanced and Emerging Economies due to an improvement in the advanced world and a stabilisation of Emerging Economies. Our expectations are that the global economy will expand 3.5% in 2014 and 3.8% in 2015.

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