Emerging market ETFs were on the decline on Wednesday as they whole word awaits word from the Federal Reserve on the future of its bond-buying program. The iShares MSCI Emerging Market Index ETF (EEM) was off half a percent. Also dragging down emerging markets equities were a series of corruption arrests in Turkey and a key manufacturing index in China slipped unexpectedly.

Uncertainty Over Outcome of Fed’s December Meeting Weighs on Markets

Anticipation of the Fed’s announcement to come on Wednesday has international markets remaining tentative. With a budget deal in congress and stronger-than-expected economic data flowing in over the last month, many believe that the tapering of quantitative easing is likely. However, the question of when remains important to traders and investors, particularly for emerging markets.

“The market is very much a coin toss about what the Federal Reserve is going to decide to do,” said Alan Gayle, senior strategist at RidgeWorth Capital Management, to Bloomberg. “The decision of the Fed to remove monetary accommodation could draw money away from some of the financially weaker emerging-market countries. So we are mindful of that.”

Much of the recent downward pressure on emerging market equities appears to be growing from this uncertainty.

“There are so many people watching the Fed’s decision, so much money on the edge, that the market is sort of just jumpy right now,” said investment strategist at Pioneer Investments Sam Wardwell, to Bloomberg in a phone interview. “Everybody knows the Fed is going to taper sooner or later. The question is, are people putting on too many short positions, or not enough short positions? This is everybody betting on the outcome so the market is going to be volatile.”

One factor, though, that could lead the Fed to opt not to start rolling back the policy is inflation. Despite stronger economic growth, inflation remains below the 2 percent target set out by the Fed and Labor Department data released Tuesday showed the Consumer Price Index (CPI) declined by 0.1 percent in October.

"If the Fed wanted an excuse to continue with the full bond purchases they could use the inflation numbers," said PNC Financial senior economist Gus Faucher. "But given the strength we have seen in the labor market and in other economic indicators, I think they do want to reduce their purchases."

Turkey Stocks Hit Hard by Arrests

The Borsa Istanbul National 100 Index declined 5.2 percent Tuesday after the sons of three cabinet ministers and several leading businessmen were arrested in a corruption probe. The declining stocks dragged down the iShares MSCI Turkey Investable Market Index Fund (TUR) over 4.5 percent.

China Stocks Decline on Negative Manufacturing Data

China stocks continued to struggle on Tuesday, with the Shanghai Shenzen CSI 300 Index falling nearly half a percent. It’s the sixth-straight day of losses for China stocks, which remain weak after the Third Plenum failed to provide targets for economic growth.

Also depressing prices was the release of the flash Markit/HSBC Purchasers Market Index declining to 50.5 from 50.8 in November. The number represents a three-month low, though the fact that it remains above 50 shows continued manufacturing growth in China.

“The weak HSBC PMI has affected sentiment,” said Zheshang Securities analyst Co. Zhang Yanbing. “After the market fell yesterday, investors are not too keen to get back into the market. A lack of interest may continue given tighter liquidity towards the end of the year.”

China ETFs felt the sting, with iShares FTSE China 25 Index Fund (FXI) down about half a percent and the iShares MSCI China Index Fund (MCHI) down over 1 percent.