Investors Pour Money Into Emerging Market ETF That Avoids China

(Bloomberg) — Investors who love emerging markets but are spooked by China’s regulatory crackdown are pouring more money than ever into an ETF seemingly tailor-made for this moment.

The $1.2 billion iShares MSCI Emerging Markets ex-China ETF, an exchange-traded fund that tracks stocks in developing countries except China, has attracted $304.8 million of fresh investment in August. That’s put the fund on course for the biggest monthly inflow since its inception four years ago, according to data compiled by Bloomberg.

“China just went through a horrible month in terms of control and intervention that’s affected several industries,” said Andres Calderon, a money manager at Miami-based RVX Asset Management LLC. “So the sales pitch is easy: Buy emerging markets, without the risk from China.” 

The rush to snap up equities from other emerging markets comes as a MSCI Inc. gauge of Chinese stocks as well as the iShares MSCI China ETF that tracks it sink to their lowest levels in almost 14 months. The index wiped out about a third of its value since February, after the central bank drained short-term cash from the market, extending losses as growth expectations dwindle and the government steps up regulation affecting the education and technology industries.

The pain has reached other Chinese-focused funds, too. The $4.7 billion KraneShares CSI China Internet Fund, known KWEB, is on track for its first weekly outflow since early July. Since their peak in February, the fund’s shares have lost about 58%, sinking to the lowest price since the pandemic shocked markets in March 2020.

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