00:00 Seana Smith
The largest emerging markets ETF that excludes China seeing record outflows in the month of March. So does that trend indicate investors are changing their tune on China? I want to bring in Aniket Ullal, he is CFRA researches head of ETF data and analysis for this week’s ETF report brought to you by Invesco QQQ. Aniket, it’s great to have you on here. So talk to me about the outflows that we are seeing from XUS ETFs that exclude China here. What does that tell you about the China trade and I guess the legs the Chinese ETFs have?
00:37 Aniket Ullal
Well, we’ve seen emerging markets ex China be a very strong trade the last couple of years. We’ve seen obviously China underperform relative to some of the other emerging markets, and China has historically been about 30% of broad emerging market ETF. That trade has, of course, reversed in the last few months. We’ve seen, particularly after the deep seek kind of models being released, much more optimism optimism around China tech. I think China large caps are up about 20% year to date this year. So that’s now starting to get reflected in some flows. So we started to see emerging markets ex China see some outflows and some money go back into China itself.
01:47 Seana Smith
And Bob is still with us here. Bob, I want to ask you about this because we’ve talked a lot about the China opportunity. Are you seeing specific opportunities playing out for China in the technicals basis? What’s that telling you?
02:05 Bob Pisani
Yeah, again, here’s another situation similar to Europe that China markets like Shanghai and Hong Kong, Heng Seng, are quite overextended right now. So we could use a little bit of a breather here. The technical conditions, they don’t they don’t stay overbought for for too long before we start seeing a little bit of a correction. We’re seeing money flows coming out of there. So it’s not a surprise to me to see that ETF money is starting to come out of some of these China ETFs and some even we started seeing the European from the prior guest told us that. Um, but certainly over a long period of time, we’re going to see good strength and good money flows, and we have over the past 17-18 months. And I looked at some of the data there, really good strong money flows into some of these China ETFs. But as of right now, pretty overbought right now, and I think that it’s due for a bit of a correction.
03:38 Seana Smith
Wow. So Aniket, given that, what is the data showing you? How are you looking at the flows into those Chinese ETFs and the extent to which that dynamic might be able to continue before any potential correction?
04:01 Aniket Ullal
I mean, you know, there’s really two segments of this market. There’s the institutional side and then the advisors and retail side, and ETFs capture both of those. What we’ve seen is that the retail flows from advisors and self-directed investors tends to lag institutional money. And so, you know, that’s because portfolios may rebalance or model portfolios may rebalance just monthly or quarterly. So I think to some extent, the fact that, you know, on the institutional side, investors may feel some of this is overbought, and that may be true, but I think it takes time for retail investors to kind of catch up catch up to that. So I think, I think we’ll see this kind of retail and advisor flows lag institutional flows a little bit in this space.
05:14 Bob Pisani
So, Aniket, we’re seeing some obviously seeing some great growth in some of these emerging countries. India is one that has my attention. The INDA is obviously ETF number is an ETF that has done extremely well over the past year, year and a half. We’re seeing good strong money flows into India here. Do you see that continuing over the next 16, 24 months?
06:00 Aniket Ullal
I think a lot of people see India as kind of a longer-term growth story for fundamental reasons. We know that there’s been a lot of digitization in India, particularly in terms of digital payments and so on. I think investors are bullish on some of those longer-term trends. You know, we’ve seen as given what happened with COVID, some companies kind of reconfiguring supply chains that may benefit countries like India and Vietnam. So I think India is kind of benefiting from longer-term trends around supply chain reconfiguration as well as things like digitization in finance. So there’s also a fairly healthy pipeline of companies in India that are private that could go public. So I think some of these factors are benefiting India ETFs right now.
07:22 Seana Smith
And Aniket, I’m curious from your perspective, where you’re seeing kind of the most flows when it comes to investors seeking safety outside of the US completely, or seeking safety in just diversifying within US equities, looking at things like dividend paying stocks, for example, consumer staples. To what extent are you seeing those two buckets, both global safety and domestic safety, competing with one another?
07:59 Aniket Ullal
I think there’s been a I was just at the ETF Exchange conference and talked to a lot of asset managers and advisors. I think there’s a lot of interest in domestic safety. I mean, the fact is that international markets don’t have the capacity to absorb all of that money that’s currently sitting in US equities. We’re seeing a lot of money interest in buffer ETFs. We’re seeing a lot of money in dividend ETFs. If you look at the last three calendar years, buffer ETFs have taken in between 10 and 15 billion dollars every year despite the fact that we’ve been in a bull market. This year, I think we could be on on track to take in 20 billion dollars into buffer ETFs. These are ETFs that essentially allow investors to trade off some upside for some downside protection. Dividend strategies this year have taken in 18 billion. So we are seeing, it’s a much different tone than where we were at the same conference last year, which was much more risk-on. People talking about crypto and the MAG 7. There’s much more discussion now about about defensive strategies, whether it’s fixed income or defensive equity strategies.