Emerging market equity funds have posted steep declines this month as investors cut exposure to risk assets amid the escalating Iran conflict, making them among the worst performers across asset classes.
Based on LSEG Lipper calculations, equity funds focused on Pakistan, Chile, Greece, Colombia, Argentina, the United Arab Emirates and Saudi Arabia were among the biggest decliners over the past month, across the 518 categories tracked by Lipper.
The pullback follows strong gains in emerging markets earlier this year, driven by relatively cheaper valuations, solid growth prospects and a weakening US dollar.
MSCI’s emerging markets equities index has fallen more than 6.0 per cent this week, compared with a 2.2 per cent decline in the MSCI World Index and a 0.7 per cent drop in MSCI United States.
Weekly flows data tracking about 13,000 emerging market equity funds showed inflows slowing to $5.8 billion this week, the lowest level in seven weeks.
Goldman Sachs said that if the disruption proves short-lived, the broader earnings impact may remain limited given the relatively resilient sector mix, and maintained its forecast for 25 per cent growth in MSCI EM earnings per share in 2026.
“However, higher starting valuations following strong gains last year leave EM equity markets vulnerable to near-term correction risks,” the brokerage said.
