Investor appetite for emerging markets is quite solid, even as rising bond yields, elevated oil prices and renewed inflation concerns threaten to pressure global equities.
Emerging-market equity funds attracted $1.57 billion in net inflows in the week through Aug 19, marking a sixth consecutive week of positive flows, according to LSEG Lipper data cited by Reuters. Emerging-market bond funds also posted a $493 million inflow, extending their winning streak to three weeks.
The renewed interest comes as global equity funds attracted $22.01 billion during the week, their strongest weekly inflow in three weeks, despite a broad market selloff late in the week.
Emerging Markets Regain Investor Attention
The flow data suggests investors are continuing to look beyond U.S. assets for diversification and potential growth opportunities.
Global equity investors had been encouraged by a strong earnings season, with roughly 90% of MSCI World companies reporting second-quarter results and combined net income rising 39.7% from a year earlier, according to LSEG data.
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However, rising government bond yields and oil prices have since raised concerns about inflation and equity valuations. That backdrop could strengthen the case for international diversification, particularly if a weaker U.S. dollar improves the relative appeal of emerging-market assets.
BMO, REX Tap Into The Trend
Against this backdrop, Bank of Montreal and REX Shares launched six new MicroSectors leveraged ETNs on Wednesday.
The products provide 3X long and -3X short daily exposure to Brazil, Japan and Taiwan.
MicroSectors 3x Long Brazil ETNs (BATS:BRZL) and MicroSectors -3x Short Brazil ETNs (BATS:BRZD) target Brazil, while MicroSectors 3x Long Japan ETNs (BATS:JPNU) and MicroSectors -3x Short Japan ETNs (BATS:JPND) provide leveraged long and inverse exposure to Japan. MicroSectors 3x Long Taiwan ETNs (BATS:TAWN) and MicroSectors -3x Short Taiwan ETNs (BATS:TPEI) offer the same structure for Taiwan.
The products are linked to VettaFi indexes tracking the iShares MSCI Brazil ETF (NYSE:EWZ), iShares MSCI Japan ETF (NYSE:EWJ) and iShares MSCI Taiwan ETF (NYSE:EWT).
Taiwan Adds An AI Angle
Taiwan stands out because of its heavy exposure to the semiconductor industry and global AI infrastructure boom. Investors awaiting Nvidia’s results next week for clues on AI infrastructure demand could also be watching Taiwan-related assets closely.
The ETNs are highly tactical instruments, with daily leverage resets that can cause longer-term returns to diverge substantially from three times the underlying index’s cumulative performance.
Still, the launch arrives at a notable moment: as emerging-market equity funds record six straight weeks of inflows, product issuers are expanding the toolkit for investors seeking targeted exposure to markets outside the U.S.
Photo: Shutterstock
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