Inflation Concerns Weigh On Emerging Markets ETFs (IDX, EPI, INP, SCIN, BRF, TUR)
On a day when risk appetite was bound to be low due to the U.S. jobs report, emerging markets ETFs are not finding favor with investors as inflation concerns continue to roil select emerging economies, particularly in Asia. The Single Country Emerging Markets ETFs Index is down 1.4%, double the loss for the S&P 500 in early afternoon trading.
The Market Vectors Indonesia Index ETF (IDX), the dominant Indonesia-specific ETF traded in the U.S., is down 4% as investors are becoming concerned Bank Indonesia, the country’s central bank, is being too soft on inflation. The central bank opted to keep interest rates unchanged at its meeting earlier this week and the country remains the only one in the region to have not hiked rates over the past year.
The bank says it isn’t concerned inflation there will surpass 5% and that currency appreciation can help mitigate some of inflation’s impact.
In India, the song is a bit different, but eerily similar. The WisdomTree India (EPI), iPath MSCI India TR Index due 12/18/2036 (INP), and Emerging Global Shares INDXX India Small Cap Fund (SCIN) are all down 3% after India’s prime minister said interest rates may need to be boosted again this month. That move would follow multiple rate hikes in 2010. Lingering effects of India’s telecom corruption scandal may also be pressuring India-specific ETFs after the Wall Street Journal ran a piece saying India’s new telecom minister is refuting allegations the scandal cost taxpayers $40 billion in lost revenue.
ETFs tracking Asian markets aren’t only ones under pressure today. The Market Vectors Brazil Small-Cap ETF (BRF) is lower by 1% while the iShares MSCI Turkey Investable Market Index (TUR) is down 3%, continuing a slide that has seen the ETF shed almost 6% in the past month.
Investors can track the Single Country Emerging Markets ETFs Index for performance trends and a suite of other metrics at tickerspy.com.
More on this topic (What's this?)
Economic Growth A Larger Influence Than Inflation For Future Stock Performance (Disciplined Approach to Investing, 4/28/13)
CPI inflation in the UK will not fall below 2.5% to 3% per year till 2020 (The Market Financial, 5/4/13)
Emerging Markets ETFs and ADRs to Watch (GDX, EMFN, AUO, FBR) (Wall Street Sector Selector, 11/20/10)
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