The Zhitong Finance App learned that US investors are withdrawing their capital from emerging market stocks, causing Vanguard Group (Vanguard Group)'s $75 billion emerging market equity fund to experience the longest capital outflow cycle since the market sell-off caused by the 2020 pandemic.

As of Wednesday, the Pioneer FTSE Emerging Markets ETF (VWO.US) has experienced net divestment for 10 consecutive days, with a cumulative withdrawal amount of 2.12 billion US dollars. The fund's largest shareholder is chipmaker and artificial intelligence company TSMC. BlackRock's iShares Emerging Markets Equity Fund is also facing capital outflows.

Although the market experienced its biggest two-day rebound in nine months after Monday's sharp fall, sentiment in developing country stock markets is still sluggish. ETF and technology strategist Todd Sohn of Strategas Securities LLC pointed out that the outflow of ETF funds could mean that large investors are liquidating their positions in emerging markets.

“Larger investors holding Pioneer FTSE Emerging Markets ETFs are likely to reduce their holdings given the continued outflow of capital over the past week,” Sohn said. This usually means that investors will withdraw from this asset class, perhaps not completely, but at least reduce their share of asset allocation.”

In the midst of recent market turmoil, Asian stock markets have not performed well, especially technology stocks such as TSMC. Investors are beginning to question whether large-scale artificial intelligence investments can meet the market's high return expectations.

The MSCI Emerging Markets Index fell 0.5%, and after plummeting 4.2% on Monday, it rebounded 3.3% over the next two days. The index fell below the 200-day moving average this week for the first time since January. Many traders will refer to this indicator to determine market trends and potential resistance levels.

Meanwhile, analysts continued to raise the profit expectations of MSCI index constituent companies for the next 12 months. This is the ninth consecutive week of increases, reaching the highest level in two years.

Options traders' pessimism about emerging market stocks has also abated, and the difference in this sentiment is narrowing compared to their pessimistic views on US stocks. Specifically, the gap between the Chicago Board Options Exchange (CBOE)'s emerging markets and the US implied volatility index fell to its lowest level since March 2020 on Monday.

Implied volatility is the market's expectation of future volatility, usually associated with uncertainty and panic among market participants. The “gap” here probably refers to the relative levels of the two indicators. If implied volatility falls in emerging markets, or if implied volatility rises in the US market, the gap between the two will narrow. This could indicate that market concerns about emerging market stocks are declining, or that concerns about the US market are increasing, or both.

Although US investors may withdraw from emerging markets due to short-term market uncertainty, analysts' increase in profit expectations may be based on confidence in the company's long-term growth potential.