China?s Ailing Growth Fuels Surge In Emerging-Market ETF Hedges
By Callie Bost and Aleksandra Gjorgievska
Emerging-market equities? descent into a bear market amid a slowdown in China?s economy has ignited hedging in a popular exchange-traded fund.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, which tracks hedging costs on the iShares MSCI Emerging Markets fund, jumped to the highest level in 18 months versus a similar gauge for the Standard & Poor?s 500 Index.
Investors in the ETF are bracing for more swings as they watch China?s deteriorating economy drag down developing markets amid the Federal Reserve?s intentions to tighten monetary policy for the first time in more than nine years. The MSCI Emerging Markets Index slid 1.1 percent Tuesday, dropping 20 percent below its September high, the threshold for a bear market.
?It?s tough to get excited about emerging markets right now,? said Tim Ghriskey, who helps oversee $1.5 billion including developing-nations stocks as managing director and chief investment officer at Solaris Asset Management. ?China is a big economy and the slowdown in growth, combined with the deflating of its equity and real-estate markets, means slower growth in a lot of emerging markets.?