The Alternate Opinion : Top-Down EM Trade Sustains Momentum Amid Weaker Dollar; Rotation from EM ex-China back into Core EM by Elara Capital
Emerging Market (EM) funds logged a sixth consecutive week of inflows, adding $2.4bn this week after $4bn over the prior two weeks. This marks the strongest pace of EM inflows since Jan’23. The current wave of allocations into GEM funds began post Trump tariff announcements, which triggered a macro-level repositioning away from the US and into broader EM exposure. This is clearly a top-down trade, fueled by a weaker US dollar, and primarily executed via large ETFs. Almost all inflows have come into iShares Core MSCI EM ETF ($4bn), Vanguard FTSE EM ETF ($1.9bn) and Avantis EM ETF ($1.6bn).
At the same time, there's a notable rotation out of EM ex-China strategies, with iShares MSCI EM ex-China ETF seeing redemptions of $2.6bn. This shift signals that global investors are now more comfortable re-including China within their EM allocations, reversing the prior trend of exclusion.
In contrast, US funds saw modest outflows for 2 nd week of $1.6bn after $4bn redemption in the previous week. Incrementally, US fund flows have been stagnant since Apr’25.
India continued to see solid traction, with $642mn in inflows this week, following $477mn last week. Since Apr25, total inflows into India stand at $3.6bn—with $2.3bn into focused funds and $1.3bn via broader EM strategies. This week’s top inflows came into Franklin FTSE India ETF ($123mn), followed by iShares MSCI India ETF ($83mn) and Kotak India Midcap Fund ($60mn). Other strong beneficiaries include S.Korea, Taiwan, and Brazil, with Brazil receiving the highest inflows relative to its AUM size.
Meanwhile, the declining Dollar Index (DXY) has supported a sixth straight week of inflows into Gold funds, adding $2.6bn this week and $25bn cumulatively over the past six weeks.
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