Credit: Shutterstock photoThe start of 2017 was dominated by developing economies. The entire bloc saw the best start to a year since 2012 . The ultra-popular iShares MSCI Emerging Markets ETFEEM) is up 30.3% so far this year against 17.8% recorded by the S&P 500.
Improving global economic growth, a subdued dollar despite Fed policy tightening, a rebound in commodity prices, better-than-expected earnings, accommodative policies and of course cheap valuation led to this gain. The surge in the Chinese technology sector is another important factor (see all Asia-Pacific (Emerging) ETFs here).
Investors should note that the emerging markets are better-positioned going into 2018. Inside the bloc, optimism is brewing even more in some specific countries. Below we highlight investing options in those.
India - iShares India 50 ETF INDY
The Indian economy is back on track as it has emerged from the short-term adverse impact of the goods and services tax and remaining after-effects of demonetization (effected a year ago). The economy grew 6.3% in the July-September period, almost in line with market estimates, but higher than the three-year low growth of 5.7% scored in the April-June quarter. Investors, who want to dip their toes in this new-found optimism, may play this fund (read: India ETFs in Focus as GDP Rebounds ).
The fund looks to track an index composed of 50 of the largest Indian equities. Banks (26.7%), Refineries/Marketing (10.6%) and Computers - Software (10.4%) take the top three spots of the fund. The Zacks Rank #1 (Strong Buy) fund charges 93 bps in fees (read: 8 ETF Picks for December ).
China - VanEck Vectors ChinaAMC CSI 300 ETF PEK
The largest economy of the developing nation, China, has experienced the best start to a year since 2006 this year. The economy expanded 6.8% year over year in the third quarter, in line with the Reuters estimate and down from 6.9% in the second quarter.
Also, China intends to " relax market access for foreign investment and expand access to its services sector, as well as deepen market-oriented reform of its exchange rate and financial system, while at the same time strengthening state firms" (read: Be Thankful to These China ETFs This Year ).
Moreover, MSCI (MSCI) announced in June that it would add China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index, beginning June 2018. The move marks China's credibility as a major investment destination in the world (read: What Does the MSCI Inclusion Mean for China A Shares and ETFs? )
The fund has a Zacks ETF Rank #2 (Buy). The underlying index of the fund - the CSI 300 Index - comprises the 300 largest and most liquid stocks in the Chinese A-share market.
Thailand - iShares MSCI Thailand Capped ETF THD
The Thailand economy grew 1% sequentially in the third quarter of 2017, beating market expectations of 0.75% growth. The growth rate was however slower than an upwardly revised 1.4% expansion in the prior quarter.
The country's GDP grew 4.3% from a year earlier in the September quarter of 2017 versus an upwardly revised 3.8% growth in the second quarter of 2017 and matched market expectations. The year-over-year growth marked the strongest expansion since the first quarter 2013. This hints at a decent growth momentum for the economy.
This fund offers exposure to companies based in Thailand. Financials (21.03%), Energy (17.7%), Industrials (11.6%) and Consumer Staples (10.9%) are the top four sectors of the fund. The product has a Zacks ETF Rank #2.
Indonesia - iShares MSCI Indonesia ETF EIDO
Indonesia's GDP grew 3.18% sequentially in the third quarter of 2017, easing from 4.0% expansion in the previous period and missing market expectations of 3.23%. Indonesia's economic growth is likely to reach 5.1% in 2018 as its massive infrastructure projects are shaping up to ease the pressure from consumption, according to Citi Research.
The Zacks Rank #2 fund is heavy on the financial sector (36.1%) followed by Consumer Staples (14.9%), Consumer Discretionary (13.3%) and Telecommunications (12.9%).
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ISHARS-SP INDIA (INDY): ETF Research Reports
ISHRS-MSCI THAI (THD): ETF Research Reports
ISHARS-MS INDON (EIDO): ETF Research Reports
VANECK-CHINAAMC (PEK): ETF Research Reports
ISHARS-EMG MKT (EEM): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
