Courtesy of Bespoke Blog, we have the latest update of best-performing stock markets by country (in local currency). Keep in mind the past few days have seen the best performance for emerging markets since July. When last we looked, Peru was in the lead.[May 20, 2009: Year to Date Returns by Country - Go Peru!] since then, Russia has taken the crown.

But all the B(razil)R(ussia)I(ndia)C(hina)'s are doing well - gains of 70-126%. G7 countries obviously lagging. Average among all 82 indexes is 33.3%. Still love my Indonesia, although I've been chasing it all year... another missed opportunity. [May 22, 2009: Indonesia: A Must Own Emerging Market]

If you've ever distrusted the earnings estimates of stock market analysts, it looks like you've had good reason to be skeptical.

The following chart shows an interesting pattern. At the top left, we see global stock prices plunging roughly three months before earnings estimates began to come down. Doesn't inspire confidence in analyst opinions, does it?

Emerging markets exchange traded funds (ETFs) have earned the respect of many investors, and providers are reacting to the positive response with specialized products.

U.S stocks have hit fresh 10-week lows. In fact, the S&P 500 has pulled back -6.8% from its recent closing high on June 11.

With the correction of the U.S markets becoming increasingly clear by the day, many "green shoot" believers are more concerned about the well-being of emerging markets. After all, the consensus seems to be that... while "emergers" were the last into the muck... they're going to be the first out.

Index compiler MSCI Barra announced earlier this week that Israel will be reclassified from emerging market status to developed market status, forcing some of the largest ETFs on the market to do some rebalancing in the coming months.

Israel will be removed from the MSCI Emerging Markets Index and the MSCI EMEMEA Index, which includes emerging markets in Europe, the Middle East, and Africa. The MSCI Israel Index will now be included in the MSCI World Index, where it is expected to rank 18th out of the 24 developed market member countries, ahead of Portugal and Ireland.

Despite these gigantic gains, there is still time to profit from emerging markets. The major averages still aren't anywhere near their 2008 highs. And the shift from the West to the emerging world is a long term trend that will take decades to unfold. With the US dollar steadily losing its value, and Europe and Japan in terminal demographic and economic decline, emerging markets are the logical place to invest for the future.

Okay, maybe it’s more than a tad premature to call a good couple of years the start of a century of exceptional economic performance. Nevertheless, if there is one place, from both an economic and investment basis, where investors are well advised to have an above average investment weighting, it’s the emerging markets. The following presents a few core elements, both fundamental and technical analysis, which provide a hint as to why having such an exposure is prudent.

From a fundamental valuation perspective, EEM compares quite favorably to the developed economies on both a growth, diversification, and valuation level. As the first table shows, the mix of EEM (emerging markets ETF) is substantially different than that of either the S&P 500 and the EFA. What may be surprising are the large exposure to Info Tech and the relatively low exposure to Industrials. You can also see the favorable comparisons in P/E with beta where you would expect it to be.

Excerpt from Raymond James strategist Jeffrey Saut's latest essay, published Monday (April 20th):

...[A]gain this morning, we reiterate that we will leave the question as to whether this is a new bull market to Dow Theory. If the DJIA, and the D-J Transportation Average, can better their early January 2009 closing highs, then according to Dow Theory we will be in a new bull market.

By now, all investors should know that China is a growing force in the global economy, but the question at hand is how does an investor play the Chinese market with exchange traded funds (ETFs) to satisfy his or her appetite? ETFs that track the emerging markets are plentiful and can be broken down into the general categories of direct exposure, BRICs exposure, and mixed exposure, states Richard Kang of Index Universe.

An example of a direct exposure ETF is the SPDR S&P China (GXC), which is down 47.8% year-to-date; a BRIC exposure ETF is iShares MSCI BRIC (BKF), which is down 56.8% year-to-date; a mixed exposure ETF is SPDR S&P Emerging Markets (GMM), which is down 49.8% year-to-date. Investors can also gain indirect exposure to China through Asia Pacific funds like the SPDR S&P Emerging Asia Pacific ETF (GMF), which is down 47.8% year-to-date.

After a thorough ravaging of the emerging market equities, audacious investors may be intrigued by the prospect of a rewarding long-term investment that comes with a “half-off sale” in ETFs.

The emerging market equities asset class is offering attractive long-term risk premiums, write Rob Arnott and John West for IndexUniverse. It is noted that the asset class is cheap on both absolute terms and in relation to U.S. equities.

Prudent investors are correct in wondering why the emerging markets need stimulus packages when they are growing at impressive rates. Either the Gross Domestic Product (GDP) numbers do not represent the true state of affairs within these economies, or GDP declarations by governments are largely deliberate misrepresentations.

In reality, there is truth to both concerns, and those seeking to buy emerging market ETFs (EEM, GMM, VWO) on further price declines are well-advised to check what they are buying into. Because as available statistics stand today, there is no way of knowing. Firstly, is the GDP model a fair reflection of the well-being of a nation? And, secondly, if it is not, are the components of the forecasted GDP growth (e.g. India 8%, Brazil 3%, China 9%, Turkey 6% and Russia 6.2%) simply telling us that official growth rates are no indicators of real unemployment, inherent underemployment, consumer demand, credit delinquencies, income inequalities and poverty levels?

By Matthew Hougan

Ever wonder why international markets perform differently from the U.S. (and each other)? Just look at the sectors.

Here is the Russian stock market:

By Jack Crooks

Think your gas and grocery bills are bad? They're just a drop in the bucket compared to some other places around the world.

Central European countries provide high dividends. On average dividend yield in Emerging countries is 1.91. Also P/E ratios are better than average. Lower P/E valuation for Hungary is mainly influenced by low GDP growth which is already one year below 1%. Hungarian economic outlook is the worst in region. See below how these emerging markets stand vs global fundamental picture.

Most hedge fund investors have a bearish outlook for 2008, but they still expect more than $200 billion to flow into the industry, according to Deutsche Bank’s sixth annual Alternative Investment Survey. Much of that money is likely to end up in emerging markets.

“Hedge fund investors’ prediction that the Middle East and North Africa will be the top performing region in 2008 indicates a clear redistribution of capital towards emerging markets,” according to Sean Capstick, London-based Co-Head of Deustche’s Hedge Fund Capital Group.