Every sector of the U.S. economy eventually capitulated, setting new lows in March 2009. Nevertheless, while our media focused heavily on gravity's pull on the Dow and S&P's bottom, there are a number of countries that have been hanging in.
Yet with the enormous catalyst of Citi's (NYSE:C) positive earnings news, talk of changes to the uptick rule, and possible modifications of mark-to-market accounting, even some of the losers now have YTD gains! The iShares MSCI ETFs for Taiwan, Brazil and Chile are all up as I type this update.
Three things have struck me about the fortunes of some international funds. First, European nations have faltered every bit as hard as the U.S. That's a blow to the so-called developed nations.
Second, the "bottom-calling" that every publication and web log, including this one, has primarily focused on the U.S. lows first set in November. The question turned from "Would the November lows hold?" to "How low would the indexes fall in March?"
Yet the irony here is that many of us ignored the relatively successful tests by big emergers like China and Brazil, as well as the smaller nations that trade with them. Take a quick look at how China (FXI), Brazil (EWZ) and Chile (NYSEARCA:ECH) DID NOT set new 52-week lows in March. (Keep in mind that the charts precede the March 10 rally in stocks.)
Third, since the world's investors haven't suddenly become bigger risk-takers, many must be seeing something in emerging regions that would justify a greater allocation to emerging stocks. Could it be that the first into the recession, the U.S., won't be the first out of it? Is it possible that the emerging countries are being viewed as better growth prospects... with or without Europe or the U.S?
Maybe a better way to look at it is through the prism of the 21st century; that is, China may be the real economic superpower. With all of its problems, it has more money to throw at its economy. The more China is able to stimulate demand, the more the suppliers like Taiwan (EWZ), Malaysia (NYSEARCA:EWM), Hong Kong (NYSEARCA:EWH) and Brazil (EWZ) stand to benefit.
In fact, it doesn't take an exhaustive "googling" to see just how interrelated and complementary the economies of China and Brazil are. Here's a small sample:
A. China and Brazil Vow to Boost Bilateral Relations -- January 20, 2009
B. China and Brazil Sign Oil Deal -- February 20, 2009
C. China and Brazil Seen As Safer Bets Than U.S. Stocks -- March 9, 2009
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.