Global investors are accelerating allocations into emerging-market exchange-traded funds, extending a powerful inflow streak as portfolios rebalance away from heavy exposure to US assets.
Emerging-market ETFs listed in the US have attracted fresh inflows for 15 consecutive weeks, bringing cumulative additions to US$42.8 billion, according to Bloomberg data. Inflows reached US$6.5 billion in the week ended Jan. 30, while total year-to-date inflows climbed to US$24.9 billion.
The shift has been underpinned by a combination of factors: renewed appetite for risk assets, a weaker US dollar, rising uncertainty around the US macro and political outlook, and a growing emphasis on geographic diversification after years of US-centric portfolio positioning.
Performance has reinforced the move. The MSCI Emerging Markets Index gained 8.8% in January, marking its strongest start to a year since 2012, as investors rotated toward assets seen as under-owned and relatively attractive on valuation grounds.
Large, broad-based vehicles led the surge. BlackRock’s iShares Core MSCI Emerging Markets ETF (IEMG) recorded US$8.9 billion of inflows in January — its largest monthly inflow since inception — while the flagship iShares MSCI Emerging Markets ETF added US$4.3 billion. Even during late-January market volatility, investors treated pullbacks as buying opportunities, particularly across Asia.
UBS Global Wealth Management said the main investment pillar heading into 2026 is diversification, noting that many client portfolios still hold significant cash and remain under-allocated to developing markets despite improving relative fundamentals and recent inflows. With volatility in Wall Street, the firm has sent a strong message to its clients to diversify into other areas for better returns.
What the EM Flow Revival Means for MSCI Thailand
Within this renewed EM allocation cycle, MSCI Thailand stands out as a potential late-cycle beneficiary.
Thailand carries a relatively small weight in the MSCI Emerging Markets Index — roughly 1.5–2% — yet historically exhibits high sensitivity to foreign capital flows due to a concentrated large-cap structure and limited free float. As a result, incremental EM inflows can have an outsized impact on local equity performance once allocation broadens beyond the most liquid markets.
Early-stage EM flows have been concentrated in North Asia, particularly Taiwan and Korea, driven by technology exposure. However, as the diversification trade matures, global funds typically rotate toward lagging, yield-oriented markets where foreign ownership remains low — a profile that closely matches Thailand’s current positioning.
Thailand’s EM exposure is dominated by defensive and cash-flow-generative sectors, including telecommunications, banks, energy and utilities, and healthcare. In an environment where investors seek diversification away from US mega-cap growth while maintaining income and balance-sheet stability, this composition becomes increasingly relevant.
With MSCI EM already delivering strong early-year gains and global investors still structurally underweight parts of Southeast Asia, Thailand appears positioned not as an early leader — but as a catch-up market should EM inflows continue to broaden geographically.
If the diversification-led EM allocation theme proves durable through 2026, MSCI Thailand is likely to benefit in the later phase of the flow cycle, where smaller, under-owned markets historically see the sharpest marginal impact from incremental foreign demand.
