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NEW YORK. — Investors have pulled money from emerging market stock funds in the past week at the fastest rate since the crises last year involving Turkey and Argentina, as concerns mount over the trade stand-off between the US and China. Funds that invest in emerging market stocks lost $3,8 billion in the week ending Wednesday, according to EPFR Global, which tracks mutual and exchange traded funds.
The weekly total was the worst in a string of outflows that now sits at five consecutive weeks and $7,8 billion.
This compares to an 11-week stretch of weekly outflows ending in July that hit $17,1 billion at the height of the economic and political crises in Turkey and Argentina last year.
Investors also pulled $1,1 billion from emerging market bond funds for the week, the second week of outflows after $2,8 billion left the funds the previous week, according to the EPFR Global data.
The fading prospects for a rapid conclusion to trade negotiations between the world’s two biggest economies sent yields on US government bonds to their lowest levels since 2017 on Thursday.
Increasing restrictions between the US and China may have dire impacts, said Sean Darby, chief global equity strategist for Jefferies, the investment bank.
“Investors continue to underestimate the second-round effects of falling demand from China if the restrictions are enforced,” Darby said.
The MSCI index of emerging market companies fell to the lowest level since mid-January. The iShares MSCI Emerging Markets ETF, which manages $30 billion in assets, saw $842 million in outflows for the week, according to Bloomberg data.
Investors will have to consider insulating portfolios to weather a prolonged unrest over the US-China trade negotiations, said Steve Chiavarone, a portfolio manager with Federated Investors.
“Both sides want to look like they can outlast the other — even if you’re suffering you want the other side to think you can last longer,” Chiavarone said. — Financial Times.
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