The Wall Street Journal | MoneyBeat on April 2, 2018.

Investors Dove Back in to Emerging Markets Last Month

By Chelsey Dulaney

Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.

Market Snap at 04/02/2018 08:33:23 AM ET
S&P 500 Futures -0.38% ↓ 2633	DJIA Futures -0.5% ↓ 24026
U.S. 10 Year -7/32 ↑ 2.764%	WSJ Dollar Index -0.08% ↓ 83.68
Crude Oil 0.51% ↑ $65.27	Gold 0.76% ↑ $1337.40

Europe	Asia
FTSE 100 0.17%	Nikkei 225 -0.31%
DAX 1.31%	Hang Seng 0.24%
CAC 40 0.72%	Shanghai -0.18%

Overnight Developments U.S. stocks looked set to follow Asian markets lower Monday amid global trade tensions and concerns over the tech sector. Futures pointed to a 0.5% decline for the S&P 500 and 0.6% drop for the Dow industrials as Wall Street was poised to return from the Easter holiday weekend, following similar declines in Asian stock markets. European markets remained closed on Monday.

The Breakfast Briefing

The volatility that rocked global markets in March didn’t scare investors away from emerging markets.

In a month during which the Dow Jones Industrial Average slid 3.7% and the S&P 500 fell 2.7%, investors snapped up stocks and bonds of nations such as South Africa and Brazil, according to data from the Institute of International Finance. The MSCI Emerging Markets Index fell just 2%.

The demand for emerging-market assets marks a divergence from past periods of market turmoil; emerging markets were often the hardest hit because of the belief among many investors that they were risky plays. In January 2016, when global markets were rocked by concerns about oil prices, a possible China hard-economic landing and global growth, MSCI’s benchmark emerging-market stock index tumbled 6.5%, outpacing the Dow’s 5.5% decline.

That dynamic was also on display earlier this year as a selloff that began in U.S. stocks in early February quickly rippled across the globe. Investors pulled billions out of emerging market assets in February, according to IIF data, with the heaviest flows out of China, Thailand and Poland. The outflows dented the big gains that emerging-market assets have seen over the past few years as economic growth has improved.

But investors warmed back up to emerging markets in March despite the persistence of market volatility. An estimated $7.6 billion flowed back into stocks and bonds, according to IIF data.

IIF described the inflows as “modest” and noted it was one of the weakest month of inflows for emerging markets since November 2016. And while many emerging-market stocks did hold up better than their U.S. counterparts last month, their gains--if any--were small.

South Korea’s Kospi index edged 0.8% higher, while Brazil's Bovespa was flat in March.

And some analysts warn against a “relatively rosy consensus” view of emerging markets. Capital Economics analysts recently said that emerging markets are facing a number of risks such as the threat of protectionist global trade policies.

Yet there are factors weighing in emerging markets’ favor. Emerging markets are experiencing their the strongest pace of growth since 2011, according to IIF.

Most important, the embrace of emerging markets in March illustrates how investors are beginning to decouple their outlook for those countries from the U.S. and the broader risk backdrop.

Are you optimistic about emerging markets? Let the author know your thoughts at chelsey.dulaney@wsj.com.