Powell put spurs record $1 billion inflow to EM ETF

The second-largest exchange-traded fund for emerging-market equities received a record one-day inflow of more than $1 billion Wednesday, as investors pared back US interest-rate bets for next year.

The iShares Core MSCI EM ETF, ticker IEMG, saw its market capitalization climb back above the $50 billion mark for the first time since June, as dovish comments from Federal Reserve chair Jerome Powell revived global demand for riskier assets.

BlackRock Inc. rolled out IEMG in 2012 as a cheaper alternative to its benchmark iShares MSCI Emerging Markets ETF. Its expense ratio stands at 14 basis points versus 69 basis points for the latter fund. After a slow start, IEMG is now nipping on the heels of Vanguard’s market leader, VWO, with $57 billion.


IEMG had already received inflows of about $2.3 billion this month, before investors fired the billion-dollar bazooka that spurred a 2.4 per cent rally on Wednesday. Sustained inflows have helped its market capitalisation rise some $8 billion this year despite a price plunge of more than 10 per cent.

Another indicator of bullish sentiment: Short traders are pruning their bets the ETF will fall, covering $818 million of bearish positions since November 5.

Developing-economy stocks have erased more than $5 trillion in this year’s sell-off and trade below the average valuation of the past 13 years.