Trading volume in BRIC
ETFs has sky-rocketed
[pdf] after the announcement of QE3. The iShares
MSCI Emerging Markets Index ETF (
) traded 90mm a day last Thursday and Friday compared to a daily
average of 40mm per day over summer.
[caption id="attachment_70771" align="alignright" width="300"
caption="Brazil: it's getting hot out here"]
Citigroup analyst Stefanie Stavri is rejoicing in the $3.3
billion of U.S.-listed emerging markets ETF inflows:
"This compares to a mere $375 million inflows last week and is
the largest week of inflows since our ETF screen began in January
2011. The last time we observed comparable inflows was on the week
of the 8th of February 2012 ($3.098 billion). We can only describe
this as a full on post-QE3 beta chase."
Last weeks ETF creation tells you investors are following our
view, which is that emerging markets will outperform, and that the
BRICs may be the best place to find underperformance that has
fundamental reasons now to perform.
I talked about
stocks set to roar back
on CNBC on Monday this week.
I have been all over Brazil (
) as a place to find the winds of policy change paying dividends.
While bullish inflows can be seen pretty much across the board,
Brazil has to be singled out, as expected, as the biggest
beneficiary of this 'risk on' trade, accounting for 32% of this
week's figure (global emerging markets and country indices
combined). We have been aggressively pushing upside trades on this
country in the run up to, and post-QE3 announcement.
Stavri explains that there have been absolutely massive
creations observed on EEM and the Vanguard MSCI Emerging
), with inflows totalling $2.3 billion. There's open interest on
the U.S.-listed outstanding emerging markets ETF universe,
which now stands at an all time high of $133.7 billion. VWO is also
at record levels of open interest
Unsurprisingly the other BRIC countries also saw big creations:
China (+$102 million), Russia ($41 million) and Taiwan ($54
million), though India to a lesser degree given its more defensive
nature, says Stavri.
It's also worth noting the juxtaposition between Russia's big
inflows and the South African and Turkey ETFs, which are flat to
slightly up on the week, again proving investors have chased after
the higher beta (underperforming) markets, at the expense of the
more defensive (outperforming) markets year to date.
We now stand at $6.7 billion of inflows year to date.