Powell Put Spurs Record $1 Billion Inflow to Emerging-Market ETF

(Bloomberg) -- The second-largest exchange-traded fund for emerging-market equities received a record one-day inflow of more than $1 billion Wednesday, as investors pared back U.S. interest-rate bets for next year.

The iShares Core MSCI EM ETF, ticker IEMG, saw its market capitalization climb back above the $50 billion mark for the first time since June, as dovish comments from Federal Reserve chair Jerome Powell revived global demand for riskier assets.

Powell Put Spurs Record $1 Billion Inflow to Emerging-Market ETF

BlackRock Inc. rolled out IEMG in 2012 as a cheaper alternative to its benchmark iShares MSCI Emerging Markets ETF. Its expense ratio stands at 14 basis points versus 69 basis points for the latter fund. After a slow start, IEMG is now nipping on the heels of Vanguard’s market leader, VWO, with $57 billion.

IEMG had already received inflows of about $2.3 billion this month, before investors fired the billion-dollar bazooka that spurred a 2.4 percent rally on Wednesday. Sustained inflows have helped its market capitalization rise some $8 billion this year despite a price plunge of more than 10 percent.

Another indicator of bullish sentiment: Short traders are pruning their bets the ETF will fall, covering $818 million of bearish positions since Nov. 5.

Developing-economy stocks have erased more than $5 trillion in this year’s sell-off and trade below the average valuation of the past 13 years.

©2018 Bloomberg L.P.