Emerging Markets Struggle Despite Strong US Equity Performance
Recent Trends in Emerging Markets and US Equities
US equities enjoyed a surge in popularity last week following the Federal Reserve’s decision to cut interest rates, triggering a significant shift in investor behavior. However, the emerging markets did not share that fortune, as they faced significant outflows for the 10th consecutive week, according to insights from JPMorgan.
Market Activity and Performance
During the recent trading session, US exchanges witnessed over 20 billion shares being traded, marking the busiest day since January 2021. This surge in trading volume reflects heightened interest in equities amidst a backdrop of favorable market conditions.
Benchmarks and Historical Context
The benchmark S&P index has shown remarkable resilience, climbing 1% this September alone, a month generally known for its weaker stock performance. This uptick has contributed to a year-to-date gain of 19%, pushing the index to all-time highs.
Contrasting Trends in Emerging Markets
In stark contrast to the positive sentiment on Wall Street, emerging markets are struggling to retain investor interest. JPMorgan reported that emerging market equities faced outflows totaling -$599 million this week, exacerbating a selloff trend that has now lasted ten weeks, culminating in an alarming -$13.6 billion in total outflows.
Regional Analysis of Fund Flows
Both Exchange-Traded Funds (ETFs) and non-ETFs contributed to the outflows this week, with ETFs alone experiencing a drop of -$476 million while non-ETFs faced a loss of -$123 million. The most significant losses regionally were attributed to Asian markets excluding Japan, which saw a decline of -$687 million, though this figure reflected a slight improvement from the -$1.1 billion seen previously. In contrast, the EMEA region recorded only minor redemptions of -$31 million, shifting from a more considerable -$94 million before.
Global Emerging Markets and Regional Highlights
Despite the overall negative trend, certain emerging markets displayed resilience. Global emerging markets secured modest inflows of +$109 million, and Latin America managed to squeeze in marginal inflows of +$10 million after a relentless 13-week period characterized by outflows totaling -$1.8 billion.
Success Stories Within Emerging Markets
India's market continues to attract capital, extending its streak of inflows to five successive weeks with a remarkable +$1.6 billion this week, bringing its total to +$7.4 billion. Indonesia also showed strong performance with inflows increasing to +$1.4 billion.
Recovery and Fluctuations in Other Markets
Following three weeks of substantial redemptions totaling -$8.2 billion, Taiwan has made a significant recovery with net purchases amounting to +$806 million. Meanwhile, South Korea continues to lag, witnessing outflows of -$453 million. Thailand has seen an uptick in inflows, recording +$181 million, building on last week's record inflows of +$745 million. The Philippines (+$41 million) and Malaysia (+$18 million) also experienced inflows, while Brazil registered slight inflows of +$59 million after enduring outflows the previous week.
Frequently Asked Questions
What was the impact of the Federal Reserve’s interest rate cut?
The interest rate cut by the Federal Reserve helped boost demand for US equities, leading to significant trading activity and higher stock prices.
How long have emerging markets faced outflows?
Emerging markets have now seen outflows for ten consecutive weeks, totaling -$13.6 billion.
Which regions contributed most to the outflows?
Asia excluding Japan was the most affected region, experiencing significant fund redemptions during the reported period.
What trends are emerging in specific countries' markets?
Countries like India and Indonesia are witnessing inflows, indicating a positive trend for those markets amidst a broader decline.
What was the trading volume on US exchanges last week?
Last week, US exchanges recorded more than 20 billion shares traded, marking one of the busiest trading sessions since January 2021.
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