As foreign funds flow out of emerging markets, Harver Group's analysts have employed their value driven investment strategy to identify three ETFs and mutual funds that they expect to perform well in the long term.
Recently foreign funds have been flowing out of emerging markets, but Harver Group's analysts believe that in long term, for clients who can handle the risk, emerging markets will pay off in the long term. Investors believe that rising interest rates will hamper global growth and the biggest impact will be in developing nations. Another fear is a slowdown in Chinese growth, which could not only hurt the market there, but bring down other emerging markets as well. Declining commodities prices could impede developing nations as their economies are depended on exporting natural resources. Social unrest in the Middle East also worries investors. Harver Group analysts see all these factors as affecting the short term. They believe that in the long term the majority of global growth will take place in emerging markets.
The analysts believe that the short term factors will make it harder to select long term investments. They recommend investing in diversified exchange traded funds and mutual funds. Their first selection is the iShares China Large-Cap ETF. It is based on the FTSE China 25 index, which tracks the largest firms in the Chinese equity market, the majority of its holdings are in the financial sector, with sizeable holdings in the telecommunications and energy sectors.
Their next selection is Market Vectors Russia Index ETF, which looks to replicate the price and yield of the DAX Global Russia+ Index. It invests 80% of its assets in shares and depositary receipts of publicly traded companies in Russia. 40% of their holdings are in oil and gas and 24% is in basic materials as Russia is a major exporter of raw materials and oil. Financial stocks account for 11% of their holdings.
Their final selection is the Vanguard Emerging Markets Stock Index Fund. It invests 95% of its assets in common shares traded on the FTSE Emerging Index, which tracks 851 stocks of complainers in emerging markets across the globe. 25% of the fund's holdings are in the financial services sector, 19% in industrial materials, and 15% in the energy sector.