(Bloomberg) -- Investors are pouring cash into the world’s largest exchange-traded fund tracking emerging-market debt as confidence mounts that the US Federal Reserve is nearing the end of its aggressive monetary tightening campaign. 

The iShares JPMorgan USD Emerging Markets Bond ETF recorded its strongest weekly inflow last week since January, gaining $765 million as investors ride the euphoria that’s been pumping money back into risk assets. The fund has seen six weeks of continuous inflows, the longest streak since August 2022, according to data compiled by Bloomberg. 

Read more: Yield Hunt Is Finally Back On for Buyers in Emerging Markets

Investors are actively looking for opportunities across emerging markets as the prospect of a soft-landing in the US and interest rate cuts starting in the first half of next year boosts appetite for riskier assets.

“Flows into high-yielding sectors is typical at a stage in which markets price in soft-landing scenarios,” said Carlos Asilis, chief investment officer and founder of advisory firm Glovista Investments. “The question is whether markets are overpricing such soft-landing scenario or not.”

Slower growth but with lower inflation outlook “merits” an end to Fed rate hikes, and a soft-landing scenario could be “nirvana” for high yielding sectors, Asilis added.

Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $968.3 million in the week ended Dec. 8, compared with gains of $1.08 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totaled $12.2 billion.

India, one of the year’s most popular trades, is once again leading flows. At the same time, China led losses, with traders actively growing pessimistic over a deepening property slump threatening the country’s growth potential in 2024. 

  • Stock ETFs expanded by $237.4 million.
  • Bond funds rose by $730.9 million.
  • Total assets fell to $307.5 billion from $309.4 billion.
  • The MSCI Emerging Markets Index closed down 0.7 percent from the previous week at 975.01 points.
  • India had the biggest inflow, of $263.6 million, led by WisdomTree India Earnings Fund.
  • China/Hong Kong had the biggest outflow, of $135.8 million, following withdrawals from DWS Xtrackers’ Xtrackers Harvest CSI 300 China A-Shares.

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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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