Emerging market assets went into a tail spin on chatter of the Federal Reserve tapering its massive bondbuying program and eventually tightening monetary policy.
The idea of rising interest rates and a stronger dollar had investors concerned that these economies would face difficulty in the credit markets as much of their recent growth had been financed by foreign bond buyers.
All of this manifested in massive outflows from emerging market funds.
But things appear to be turning around.
"After reporting cumulative outflows of US$51.2bn (-6.6% of AUM) in the last 22 consecutive record outflow weeks, Dedicated EM Funds reported inflows of US$2.49bn this week," noted Morgan Stanley's Jonathan Garner. "This is the first inflow week since October 23, 2013."
"ETF type funds reported inflows of US$2.37bn (95% of the total inflows) for the current week, this is the largest inflow reported by ETF funds since September 11, 2013. Non-ETF funds reported marginal inflows of US$0.13bn for the current week. Within EM Funds, all regional funds except EM Asia regional fund reported inflows for the current week. GEMs regional fund reported inflows of US$3.09bn for the current week - the largest weekly inflow since January 16, 2013."
Here's the chart from Garner:
em fund flows
Morgan Stanley
For another look at waning volatility, RBC Capital Market's Jonathan Golub offers this chart of the VIX (aka the "fear gauge") tumbling.
vix fear gauge
RBC Capital Markets