(Reuters) – Hammered by the fallout from a surge in U.S. government bond yields, mutual funds and exchange-traded funds that invest in emerging stock markets are now this year’s biggest investment losers, according to Refinitiv Lipper data.
Funds that invest in Colombia, Argentina and Brazilian equities have slumped over 10% on average, the biggest among the 502 categories listed by Lipper. The categories include equities, bonds, commodities and other assets across the world.
Graphic: Top 10 decliners among mutual funds this year – https://fingfx.thomsonreuters.com/gfx/mkt/rlgvdbgnzvo/top%2010%20decliners.jpg
At the start of this year, many investment banks and funds bet on emerging-market equities on optimism over vaccine rollouts and hopes of a faster recovery from the pandemic.
But such hopes were quashed by the spurt in U.S. bond yields in recent weeks, as higher market interest rates raised borrowing costs for emerging-market firms and prompted capital outflows from typically higher-yielding emerging economies.
The main emerging-markets equities index has lost about 5.6% in the past month, led by declines in China, Turkey and Philippine indexes.
Graphic: Emerging market equities’ performance this year – https://fingfx.thomsonreuters.com/gfx/mkt/ygdpzgayjvw/Emerging%20market%20equities’%20performance%20this%20year.jpg
The abrupt removal of Turkey’s central bank chief and worries over a new COVID-19 wave in Europe sent a new shiver through emerging-market stocks this week.
Analysts have cut their 2021 profit forecasts for companies in Argentina, Colombia and Turkey by over 5% each in the last month, the data showed.
Graphic: Emerging market companies’ earnings estimates change – https://fingfx.thomsonreuters.com/gfx/mkt/gjnpworerpw/Emerging%20market%20companies’%20earnings%20estimates%20change.jpg
(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; editing by Patrick Graham, Larry King)
