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: Alternative thinking

Mar 16, 2017

Portfolio Manager Davide Cataldo discusses the results of the Pioneer Investments’ survey on liquid alternatives and how investors can be encouraged to increase their allocation.

SPONSORED FEATURE: Interest rate risk hedging: Swapping to other options

Mar 16, 2017

Heightened margin requirements for cleared and uncleared OTC derivatives pose a challenge for legitimate hedging activities and are driving financial institutions to explore alternative hedging...

SPONSORED FEATURE: Why blockchain could be the fund industry’s next Ford Model T

Mar 16, 2017

Blockchain aims to radically change the way investors can access funds, says Olivier Portenseigne, Managing Director and Chief Commercial Officer of Fundsquare.

SPONSORED FEATURE: Open architecture: In need of protection

Mar 16, 2017

Greater efficiency must be embraced to ensure regulatory changes do not destroy choice for fund buyers, says Bernard Tancré of Clearstream.

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.


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.


Mar 07, 2017

Funds Europe speaks to leading Luxembourg industry figures about the growing regulatory demands on asset servicers and how to remain profitable in spite of major investments in technology.