Emerging market equity funds slide as Iran conflict sparks selloff

Core Viewpoint - Emerging market equity funds have experienced significant declines due to increased risk aversion among investors amid the escalating conflict in Iran, making them some of the worst performers across asset classes [1]. Group 1: Market Performance - Equity funds focused on countries such as Pakistan, Chile, Greece, Colombia, Argentina, the United Arab Emirates, and Saudi Arabia have been among the largest decliners in the past month, as tracked by LSEG Lipper [1]. - The MSCI emerging markets equities index has fallen more than 6% this week, contrasting with a 2.2% decline in the MSCI World Index and a 0.7% drop in the MSCI United States [1]. Group 2: Fund Flows - Weekly inflows into emerging market equity funds have slowed to $5.8 billion, marking the lowest level in seven weeks [1]. Group 3: Future Outlook - Goldman Sachs maintains a forecast for 25% growth in MSCI EM earnings per share in 2026, suggesting that if the current disruptions are short-lived, the broader earnings impact may remain limited [1]. - However, the brokerage warns that higher starting valuations following strong gains last year make emerging market equity markets susceptible to near-term correction risks [1].