Beyond The BRIC: Ten Country Specific Emerging Market ETFs
With the developed markets of the world crippled by mounting debt, stagnant growth, and suddenly severe political risk, investors have undeniably begun allocating a larger portion of their portfolios to emerging markets. Boosted by ongoing urbanization, flexible and cheap manufacturing, and an abundance of natural resources, the developing economies have emerged as the leaders of the global recovery efforts, accounting for the vast majority of global economic growth as they further distance themselves from advanced economies.
The emerging markets exposure established by U.S. investors tends to be heavy in equities of Brazil, Russia, India, and China. The BRIC term was coined by an economist at Goldman Sachs in 2001 who argued that based on the rapid development, the bloc of countries would eclipse the world’s richest economies by 2050. The BRICs may be the best known and largest economies among emerging markets, but they’re hardly the only options. Below, we profile ten ETFs offering pure play exposure to non-BRIC emerging markets:
10. iShares MSCI South Africa Index Fund (EZA)
EZA seeks to replicate the performance of the MSCI South Africa Index, a benchmark that measures the performance of the South African equity market. Like many emerging market ETFs, EZA allocates a big portion of assets to industrial materials and financials; these sectors make up about 60% of holdings. This will be a particularly interesting fund to watch starting June 11th. With the World Cup being held in South Africa, the economy will be on display to the international community over the coming four weeks (see World Cup Of ETFs: Plays On All 32 Teams).
9. iShares MSCI Turkey Investable Market Index Fund (TUR)
TUR follows the MSCI Turkey Investable Market Index, a benchmark composed of the largest and most liquid stocks listed on Turkish stock markets. In recent years Turkey has seen a stable growth in the banking, retail, and telecommunications sectors which has led to an increasing foreign direct investment in the country. Currently, about half of the fund’s assets are allocated to the financials sector (see Turkey ETF In Focus On Israel Showdown).
8. Market Vectors Indonesia Index ETF (IDX)
IDX tracks the Market Vectors Indonesia Index, providing exposure to publicly traded companies that are domiciled and primarily listed in Indonesia, or that generate at least 50% of their revenues in Indonesia. This fund holds nearly 70% of its assets in large market capitalization companies, while allocating the remaining 30% only to giant and medium capitalization firms. Recently, IDX had its largest one day gain in nearly two years (see Indonesia ETF Soars On Commodity Strength, Astra Dividends).
7. iShares MSCI Thailand Index Fund (THD)
THD measures the MSCI Thailand Investable Market Index, a benchmark that invests in the largest and most liquid Thai stocks. The ETF has shown resilience in recent months, holding its ground despite the rioting that took place in the country through out the closing days of May. As a result of the rioting, the Thai stock exchange was nearly burned down, yet the fund still held its ground. THD is up by roughly 5% on the year and is up by just over 40% in the past 52 weeks.
6. iShares MSCI Mexico Index Fund (EWW)
EWW tracks the MSCI Mexico Investable Market Index, a benchmark that makes big allocations to telecom and industrial materials stocks; over 55% of assets are in these two sector. While this ETF’s ticker may be slightly off-putting, its performance is not. EWW is up about 3% on the year, and has seen close to a 33% gain in the past 52 weeks. Mexico currently boasts a 5.5% unemployment rate, one of the lowest in the world.
5. Market Vectors Vietnam ETF (VNM)
VNM seeks to replicate the performance of the Market Vectors Vietnam Index, which provides exposure to publicly traded companies that aredomiciled and primarily listed in Vietnam and which generate at least 50% of their revenues from Vietnam. Agriculture is the big business for Vietnam, being the second largest producer of rice globally. Vietnam also has the largest percent of land for permanent crop use in the world, coming in at nearly 7%.
4. Market Vectors Poland ETF (PLND)
PLND measures the Market Vectors Poland Index, which is a diversified index consisting of about 25 companies either headquartered in Poland or deriving at least 50% of their revenues from the country. Poland is a particularly interesting economy, as its relies heavily on domestic spending to drive growth. As such, the economy was somewhat insulated from the regional and global chaos in recent years. Poland did not fall victim to any recession in the 2000′s and it experienced the greatest GDP growth of any country in the EU during 2009.
3. Egypt Index ETF (EGPT)
EGPT follows the Market Vectors Egypt Index, providing exposure to publicly traded companies that are domiciled and primarily listed on an exchange in Egypt or that generate at least 50% of their revenues in Egypt. The Egypt ETF has a heavy weight in the financials (42%) and industrial materials (31%) sectors, a common occurance among large cap-focused emerging markets ETFs.
2. iShares MSCI Chile Index Fund (ECH)
This fund tracks the MSCI Chile Investable Market Index, which measures the performance of the Chilean equity market. ECH allocates its resources to a wide range of sectors, making it a good play for investors seeking diversity (see the full allocation here). In 2009, a $4 billion stimulus plan was announced for Chile that, even at modest predictions, will raise GDP by 1.5% or more in coming years. The country has impressed international investors in recent years, as the stubborn refusal to spend lavishly in recent years allowed the government to quickly implement stimulus measures as the global recession hit.
1. iShares MSCI All Peru Capped Index Fund (EPU)
This ETF follows the MSCI All Peru Capped Index, which measures the performance of the Peruvian equity market, home to one of the largest economies in South America. Peru boasts a wealth of natural resources; as the largest producer of silver in the world, the country received a boost from the recent run-up in precious metals prices. EPU is up about 3% on the year.
Disclosure: No positions at time of writing.