India ETFs Lead Inflows In June On Growth Optimism Post-Election

(Bloomberg) -- India’s growth outlook is luring investors, with the South Asian giant leading inflows among US exchange-traded funds tracking emerging markets over the past month, after Prime Minister Narendra Modi won a third term in power. 

The inflows were led by iShares MSCI India ETF (ticker INDA), Franklin FTSE India ETF (ticker FLIN) and WisdomTree India Earnings Fund (ticker EPI). In total, the three funds received $1.08 billion over the past month, driven by investor optimism over the nation’s growth prospects. 

In the case of FLIN, the fund recorded its biggest monthly inflow on record, of $324.59 million. 

“India remains the best structural, long-term, opportunity in the world, driven by a combination of attractive demographics, market friendly (and democratically elected) governance, supply chain diversification out of China, and a growing middle class,” said Malcolm Dorson, senior portfolio manager and head of emerging-market strategy at Global X Management in New York. 

Indian equities have been rallying since the ruling Bharatiya Janata Party secured sufficient support from key allies to form a coalition government, ensuring Modi’s third straight term. The nation’s stock-market value exceeded $5 trillion for the first time last month as Modi committed his government to policy continuity.

The June election brought short-term volatility across Indian equities, though markets settled after Modi won backing from his coalition of allies. 

“The election signaled economic continuity and India is now harvesting all of the important work implemented over the past 10 years,” Dorson said. “Momentum is picking up, and we’re seeing it across the board from manufacturing to consumption.” 

On the other side of the spectrum, three out of the five largest outflows came from US exchange-traded funds tracking Chinese equities. 

“China is supporting its financial markets, but its not doing enough yet,” said Andy Wester, senior investment analyst at Proficio Capital Partners in Newton, Massachusetts. “Flows are chasing performance and I wouldn’t be surprirsed if those dollars went out of China and into India.” 

Across the broader region, investors continued to pull cash out. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $204 million in the week ended June 28, compared with losses of $5.92 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $8.86 billion.

• Stock ETFs contracted by $218.8 million.
• Bond funds rose by $14.7 million.
• Total assets fell to $348.4 billion from $348.9 billion.
• The MSCI Emerging Markets Index was little changed from the previous week at 1,086.25 points.
• China/Hong Kong had the biggest outflow, of $229.7 million, following withdrawals from DWS Xtrackers’ Xtrackers Harvest CSI 300 China A-Shares.
• India had the biggest inflow, of $99.2 million, led by WisdomTree India Earnings Fund.

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Following are tables detailing net flows for emerging-market ETFs in US dollars. The data include the holdings-weighted allocations from multi-country funds, as well as country-specific funds. Latest and historic flows are allocated using latest fund weightings (figures in USD millions unless otherwise stated):

Regional Summary

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Americas

Asia Pacific

Europe, Middle East & Africa

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