Emerging Markets ETFs Still Have Room to Grow

Some of the best-performing exchange traded funds (ETFs) this year have been in the hot (and getting hotter) area of emerging markets. But is there any steam left in this rally?

Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy. In the near-term, growth rates in developed nations are expected to be lackluster, and much less robust than those in the developing world’s.

Countries that are resource rich and developing are stockpiling cash and shoring up their balance sheets for a strong recovery and a growth spurt unlike any seen before. Earnings and economic activity have been revived. Morgan Stanley feels that earnings in emerging markets have bottomed in the third quarter and they’re now set to climb again.

There are a variety of ways to play emerging markets. There are broad funds, such as iShares MSCI Emerging Markets (NYSEArca: EEM), Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI EAFE Index (NYSEArca: EFA).

There are funds that focus on regions, such as Claymore/BNY Mellon BRIC (NYSEArca: EEB) and BLDRSAsia 50 ADR Index (Nasdaq: ADRA).

Finally, there are single-country funds, such as iShares MSCI Brazil (NYSEArca: EWZ) and Market Vectors Vietnam (NYSEArca: VNM).

Keep in mind that the narrower you get in your exposure to emerging and frontier markets, the higher your risk will be. Be sure to have an entry and exit strategy before you invest.

Comments

[User 489641:]

WHAT'S YOUR TAKE ON EPI (INDIA)

Nov 02 12:19 PM

[surfgeezer:]

Agree with you till the end. My exit strategy will be when I see America ready to grow faster than Brazil or Australia. That is not even on the dim horizon. With dividends and interest rates higher I see no reason to sell.

Nov 02 01:40 PM

[Mad Hedge F...:]

nbd ) If someone mentions the word “decoupling” to you, turn around and walk away, delete their number from your Blackberries and I-Phones, delink from their Facebook page, and block their Tweets and e-mails. Knowing this individual will be seriously injurious to your wealth. When the stock market rolls over, don’t expect to be able to hide anywhere, except in cash. The way all assets classes simultaneously piled into the “down” elevator at exactly the same time last week is proof of how highly correlated markets are these days. The causes are mega hedge funds with newly tightened risk controls and itchy trigger fingers, vast quantities of stock electro shocked by computer algorithms, and too recent memories of the bloodletting earlier this year. I have always viewed diversification as a great way to lose more money in varied places with more exotic sounding names. Remember the old saw that when America sneezes, the rest of the world catches cold? Now when the US says “katchoo”, the everyone else catches the H1N1 virus, AIDS, and the bubonic plague. The US has become on the canary in the coal mine that warns of deadlier global contagions. There is really only one trade these days. Is the world getting better, or not? Only the volatility will vary across instruments and countries. As much as I love China (FXI) and commodities for the long haul, when the US markets drop, I expect them to plummet twice as fast.

Nov 02 01:56 PM

[Plant the s...:]

I agree with Mad Hedge, China's ability and resource countries ability to sustain growth without either low or robust US growth is fairly unlikely. How does a company grow when its biggest customer is in trouble, not very well I would say.

Nov 02 02:02 PM

[Analyste de...:]

The biggest shocker in last September's decline, for asset allocators, should be how well EM equities performed. Usually "the most risky" asset class, they didn't do much worse than the broad US market indices overall.

The next big swan dive will probably show EM to be a marginally better investment on risk metrics than US equities, even better if there's a Dollar crisis included.

It's not decoupling but entails a radical reorientation of our VAR.

Nov 02 06:43 PM

[TJ Schoenlein:]

My compliments to Mad Hedge.. I couldn't have said it better. Listening to the experts can be extremely dangerous to your financial health.

Nov 03 10:36 PM