Emerging market ETFs recorded inflows for the ninth consecutive week, with China’s capital inflow surging and maintaining the top position

Wallstreetcn
2025.07.28 17:39
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Last week, investors net purchased emerging market stock and bond ETFs for the ninth consecutive week, with the inflow of Chinese assets more than doubling compared to the previous week, ranking first. Analysts say that despite the high valuations in emerging markets, investors remain optimistic about their performance. As trade tensions ease and the Federal Reserve approaches interest rate cuts, this change will continue to bring funds to emerging markets

As the Federal Reserve approaches interest rate cuts and concerns about the impact of U.S. President Trump's tariff policies diminish, funds continue to flow into emerging markets. Last week, investors net bought emerging market stocks and bond ETFs for the ninth consecutive week, with the inflow of Chinese assets more than doubling compared to the previous week, ranking first.

According to Bloomberg data, for the week ending July 25, emerging market ETFs listed in the U.S. that invest in developing countries and specific nations recorded a total inflow of $2.36 billion, significantly higher than the previous week's $672.4 million. Among them, equity ETFs saw an inflow of $2.4 billion, while bond ETFs experienced an outflow of $36.9 million.

In terms of market performance, the MSCI Emerging Markets Index rose 0.7% last week to 1257.78 points.

Since the beginning of this year, the total inflow of funds into the aforementioned emerging market ETFs has reached $16.8 billion.

By region:

  • China had the largest inflow of funds, totaling $1.36 billion, with the KraneShares CSI China Internet ETF (KWEB) leading; the inflow from China increased by 105% compared to the previous week.
  • Argentina had the largest outflow of funds, totaling $4.29 million.

The iShares Core MSCI Emerging Markets ETF (IEMG), with an asset management scale of $99 billion, was the ETF with the highest inflow for the week, with a net inflow of $554 million; its peer, the Vanguard FTSE Emerging Markets ETF (VWO), recorded an inflow of $530 million during the same period.

Wells Fargo strategist Brendan McKenna stated:

Although valuations have become elevated, investors still find emerging markets attractive, trade uncertainties are diminishing, and the Federal Reserve is getting closer to starting a rate-cutting cycle; this situation should continue to attract funds into emerging markets.

Despite the elevated valuations in emerging markets, investors remain optimistic about their performance. As trade tensions ease and the Federal Reserve approaches interest rate cuts, this change will continue to bring funds to emerging markets.

A previous analysis by The Wall Street Journal pointed out that while the overall valuations of emerging markets are no longer as cheap, a deeper investigation reveals that the cyclically adjusted price-to-earnings ratios of a few markets remain in single digits

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