Emerging markets ETF's historic inflow momentum reverses, with India experiencing the largest outflows

As the Iran conflict continues, traders withdrew billions of dollars from exchange-traded funds (ETFs) investing in emerging market assets last week, ending 20 consecutive weeks of inflows. Among the markets, India experienced the largest outflows.

Data shows that during the week ending March 13, a total of $2.35 billion was pulled from U.S.-listed ETFs investing in developing countries and single-country emerging market ETFs, reversing the previous $58.9 billion in continuous inflows. The weekly outflow was the largest since April 2025, with high-yield bond strategies and Asian stock-focused ETFs leading the redemptions.

Stock ETFs saw outflows of $1.21 billion;

Bond ETFs saw outflows of $1.14 billion;

Total assets decreased from $483.9 billion to $476.1 billion.

In terms of markets, India experienced the largest outflow of $674 million;

South Korea saw the largest inflow of $587 million, marking the fifth consecutive week of net inflows.

The Middle East situation shows no signs of easing, with risk aversion spreading across global markets last week. Assets in emerging economies generally came under pressure, with the MSCI Emerging Markets Stock Index falling 2% last week, reaching its lowest level since January. Meanwhile, as the dollar strengthened, a measure of emerging market currencies has erased its gains for the year.

“On the surface, this seems purely for risk aversion,” said Todd Sohn, Chief ETF Strategist at Strategas. “If the Federal Reserve’s policy isn’t as accommodative as previously expected, demand for high-risk bonds will decrease. Additionally, high energy prices could trigger a new round of inflation, further pressuring markets.”

Despite ongoing tensions, markets rebounded starting Monday. With hopes that more oil tankers could pass through the Strait of Hormuz, crude oil prices retreated — although shipping along this critical oil route remains nearly halted. However, with traders preparing for the Federal Reserve’s interest rate decision on Wednesday and Jerome Powell’s press conference, volatility is expected to remain high this week.

The $14.9 billion iShares JPMorgan USD Emerging Markets Bond ETF recorded the largest outflow, with traders withdrawing a record $2.3 billion last week, the largest weekly outflow since the fund’s inception in 2007. ETFs focused on Asia also experienced outflows, including the iShares MSCI India ETF, which saw $466 million in redemptions.