Since the coronavirus pandemic, emerging markets (EM) investors have had little to cheer about, but the latest European Union (EU) stimulus package certainly gives them a reason to celebrate.
Per a Reuters report, “Brazil’s real jumped to a one-month high on Tuesday after the central bank announced aid to small and medium businesses, while investors around the world cheered a massive stimulus plan from the European Union. The real leaped as the central bank launched a program aimed at providing up to 120 billion reais ($23 billion) in loans to small and medium-sized enterprises, which have struggled to access credit during the COVID-19 pandemic.”
This had a net positive effect on other Latin American currencies as they rose against the dollar.
“Commodity-linked currencies, including the Chilean and Mexican pesos, firmed 0.9% each against the U.S. dollar, which hit a four-month low. Global markets cheered a historic deal by European Union leaders on a massive stimulus plan for their coronavirus-hit economies in the early hours of Tuesday.
“Fiscal policy remains the center of attention, reflecting the broader push toward growth-enhancing policies in the wake of COVID,” said Mark McCormick, global head of FX strategy at TD Securities.
This latest move has to cast a spotlight on emerging markets exchange-traded funds (ETFs).
EM Equities Exposure via ETFs
Investors looking to get into EM can use the Goldman Sachs MarketBeta Emerging Markets Equity ETF (GSEE). GSEE seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive GBS Emerging Markets Large & Mid Cap Index.
The fund invests at least 80% of its assets in securities included in its underlying index, in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index, which consists of equity securities of large and mid-capitalization issuers covering approximately the largest 85% of the free-float market capitalization in emerging markets.
Investors who want broad exposure to EM can look at funds like the Vanguard FTSE Emerging Markets ETF (VWO ). VWO employs an indexing investment approach designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. It invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the index in terms of key characteristics.
Another fund to consider is the iShares MSCI Emerging Markets ETF (EEM ). EEM seeks to track the investment results of the MSCI Emerging Markets Index. , which is designed to measure equity market performance in the global emerging markets.