Winds Shift for Emerging-Market Debt

2017 started off strong. Emerging-market debt funds set record inflows and had solid returns, but now halfway through the year, many are starting to run out of steam. 

Within the past week, investors withdrew $826.8 million from the biggest emerging-market debt exchange-traded fund (ETF), the largest withdrawals in the $11.5 billion fund's history.  Now, with losses seeming relatively minor, many wish to forge ahead. iShares J.P. Morgan USD Emerging Markets Bond ETF increased its assets by more than 50 percent, so the small setbacks are understandable. 

Yet, one cannot underestimate the importance of these new sentiment developments. Many investors will exit their investments as soon as markets start to wobble even if the global economy's own outlook is good.