Wall Street Week Ahead: Investors bet emerging markets will weather coronavirus impact

NEW YORK (Feb 15) - Investors are edging back into emerging markets, even though worries about the coronavirus’ impact on global economic growth have clouded prospects for the boom-and-bust asset class.

Nearly $730 million flowed back into emerging markets exchange-traded funds (ETFs) in the past week, according to Lipper, after two straight weeks of outflows that accompanied sharp declines in the stocks and currencies of developing countries.

The MSCI Emerging Markets Index .MSCIEF, which measures stock performance, has rebounded 4% from its early February low, though it remains down on the year. Another index measuring emerging markets currency performance .MIEM00000CUS was still sharply lower, reflecting the slide in a range of currencies from Asia to Latin America.

As of Friday, the coronavirus has infected 63,581 people and killed 1,380. Still, investors have grown more hopeful that economic damage will be limited.

Before the outbreak, emerging markets stocks had steadily climbed since early December as analysts forecast a re-acceleration of global economic growth and the United States and China agreed on a Phase 1 trade deal. Chinese equities make up roughly a third of the weighting in the MSCI Emerging Markets Index.

Emerging markets ETFs have seen a steady stream of money pouring in since late October and have not had outflows on a monthly basis, Lipper data showed.

Reuters