Since the market sell-off caused by the epidemic in 2020, the emerging market stock fund under the Vanguard Group, which has a scale of 75 billion U.S. dollars, has experienced the longest period of capital outflow.
According to the Intelligent Finance APP, American investors are withdrawing from emerging market stocks, causing the emerging market stock fund under the Vanguard Group, which has a scale of 75 billion U.S. dollars, to suffer from the longest period of capital outflow since the market sell-off caused by the epidemic in 2020.
As of Wednesday, the Vanguard FTSE Emerging Markets ETF (VWO.US) has experienced net outflows for 10 consecutive days, with a total withdrawal of 2.12 billion US dollars. The fund's largest holdings are chip manufacturer and AI company Taiwan Semiconductor. BlackRock's iShares Emerging Markets Stock Fund is also facing capital outflows.
Despite the largest two-day rebound in nine months after Monday's market plunge, sentiment in emerging market stocks remains depressed. Todd Sohn, ETF and technology strategist at Strategas Securities LLC, pointed out that outflows from ETF funds may mean that large investors are liquidating their positions in emerging markets.
Sohn said:"Given the continued outflow of funds over the past week, large investors who hold positions in the Vanguard FTSE Emerging Markets ETF may reduce their holdings. This usually means that investors are withdrawing from this asset class, perhaps not completely exiting, but at least reducing their weight in asset allocation."
In recent market turbulence, Asian stocks, especially technology stocks such as Taiwan Semiconductor, have performed poorly. Investors are beginning to question whether large-scale investments in AI can meet the market's high return expectations.
The MSCI Emerging Markets Index fell by 0.5%, rebounding 3.3% in the next two days after a 4.2% drop on Monday. This week the index temporarily fell below the 200-day moving average for the first time since January, a measure that many traders use to determine market trends and potential resistance levels.
At the same time, analysts continue to raise profit expectations for MSCI component companies over the next 12 months, which has been the ninth consecutive week of upward revisions, reaching the highest level in two years.
Option traders' pessimism about emerging market stocks has also eased, and the difference in sentiment between them and US stocks is narrowing. Specifically, the gap between CBOE's emerging market and US implied volatility indicators fell to its lowest level since March 2020 on Monday.
Implied volatility is the market's expectation of future volatility, usually related to uncertainty and panic among market participants. The "gap" here may refer to the relative level of the two indicators. If the implied volatility of emerging markets declines or the implied volatility of the US market rises, the gap between the two will narrow. This may indicate that concerns about emerging market stocks are decreasing, or concerns about the US market are increasing, or both are happening at the same time.
Although American investors may be withdrawing from emerging markets due to short-term market uncertainty, analysts' upward revisions to profit expectations may be based on confidence in the long-term growth potential of companies.