BlackRock ponders why rate rise boosted EM

Emerging_markets_newspaperEmerging markets was the top traded iShares ETF in European markets on March 16 – a fact seen as an anomaly given the Federal Reserve interest rate rise. The iShares MSCI EM Ucits ETF in US dollars saw volume of over $125 million (€116 million), defying expectations that the rate rise would negatively affect emerging market equities. Wei Li, regional head of iShares investment strategy at BlackRock, said: “We would expect that following a Fed rate hike, rate-sensitive exposures like emerging markets would see a decline, but this was not the case. Surprisingly, EM [emerging market] equities outperformed the broad equity market in yesterday’s trading session.” Li said the reason for this may be that while markets had priced in the rate rise, the ‘dot plot’, which indicates that two more hikes are expected for the rest of the year, remained unchanged. “This was read by the market as dovish, given how far the markets had already priced in the rate rise.” BlackRock has a positive view on emerging market equities, supported by a better growth picture and still attractive valuations. “The Fed’s rhetoric further boosts the investment case,” said Li. The ETF traded 627% more than its average daily volume. Patrick Mattar, of iShares capital markets, said March 16 flow data supported observations that exposures that historically would have suffered after a rate hike, actually received inflows. He noted that since the start of the year, global flows had picked up in both emerging market fixed income and equity. But he said the true picture was that European investors had been buying emerging market debt and selling emerging market equities for most of the year. ©2017 funds europe

Sponsored Profiles

SPONSORED FEATURE: Investing for income

May 17, 2017

Portfolio Manager Thomas Kruse examines the findings from Pioneer Investments’ survey on income investing and outlines ways of achieving a target income.

SPONSORED ARTICLE: A radical solution to KYC concerns

May 17, 2017

The 1MDB affair shows that lax know-your-customer and due-diligence procedures are a major risk, says Paolo Brignardello, head of product management and marketing, Fundsquare. New solutions are...

SPONSORED FEATURE: AIFMD - What does Brexit mean?

Apr 18, 2017

An open discussion between funds industry experts and initiated by SGG Luxembourg took place in London to examine  the implications of Brexit for UK fund managers marketing to the EU.

SPONSORED FEATURE: Luxembourg fund reporting – CRS vs FATCA

Apr 18, 2017

Luxembourg funds need clear procedures for CRS compliance, writes Andrew Knight, Partner at M Partners, a member of the Maitland network of law firms.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.



May 17, 2017

With such an intangible product, it can be hard for asset managers to communicate what they do. Having personality and connecting with customer aspirations may be the key, our branding roundtable hears.

ROUNDTABLE: The issue is perception

Mar 21, 2017

Our panel discuss tax transparency, the elegance of private placement and why Jersey could do more to promote itself. Chaired by Tom Cowsill in Saint Helier.