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Thursday, Aug 22
Taper could favor Europe, harm Emerging Markets
- Europe is still missing $100B of net inflows, says SocGen, taking a close look at money going in and out of global mutual funds and ETFs. The $100B is the difference between flows into the U.S. and out of Europe since 2007 - a period which not coincidently had American equities outperforming those on the Continent. Consider that Japan and Emerging Markets (especially EM) also saw inflows during this period, and the contrast is even more startling.
- The taper should favor European equities over those in the U.S. says the team, and early summer data - while thin - shows inflows picking up into Europe and slowing here.
- Maybe benefitting the most from QE are emerging market inflows which have soared far higher than those of the U.S. or Japan. "Mind the liquidity gap," says the bank, as the end of asset purchases could prove destabilizing for EM assets. The anticipation of such has already started to see money bleed out of funds targeting those markets.
- European equity ETFs: EZU, VGK, FEZ, EPV, IEV, ADRU, FEP, FDD, UPV, EPV, DFE, FEU, FEEU Bonds: EU.
- Emerging market equity ETFs: AGEM, EEM, ADRE, SCHE, GMM, VWO, DEM, EWEM, PXH, PIE, EWX, DGS, EMLB, EDC, EET, EMSA, EDZ, EEV, EUM, TLTE, HILO, EELV, EEMA, EMFT, DVYE, FEMS, EVAL, EGRW, EMCR, IEMG, EMDR, EEME.