These four emerging market ETFs are weathering the Fed’s tapering storm and a slowdown in China.
Emerging market assets are under pressure as China, the world’s second-largest economy, slows and shifts away from an export-oriented economy. But neighboring countries in Southeast Asia are benefiting from China’s shift to a more consumption-oriented economy.
So while China’s growth engine is shifting gears, and its dominance of low-end manufacturing is fading, countries including Indonesia, the Philippines, Vietnam and Thailand stand to emerge from China’s shadow and lead the next wave of low-cost global manufacturing growth. Stratfor, the geopolitical consultancy, singled out 16 countries it reckons will collectively take China’s place in the coming years.
“Right now, each emerging country is dealing with its own issues and is getting over the hangover of the Federal Reserve’s economic stimulus,” said ETF.com ETF specialist Dennis Hudachek. “You’re going to see more of a divergence in returns from these emerging countries as opposed to the last decade where emerging and broader markets just moved in unison.”
The four countries noted above—Thailand, the Philippines, Vietnam and Indonesia—are each accessible to investors via single-country ETFs. Here are those funds; their returns and the broader characteristics of each of those investment destinations:
4. Thailand, iShares MSCI Thailand Capped ETF (THD | B-96)
Thailand is currently embroiled in ongoing civil unrest, with protestors calling for the removal of Prime Minister Yingluck Shinawatra to resign from office, thus ending the influence of her brother, the billionaire and former Thai leader Thaksin Shinawatra. Thaksin was ousted in a bloodless military coup in 2006.
As a result, Thailand’s central bank cut its benchmark interest rate to 2.00 percent from 2.25 percent, the lowest level in more than three years, to prop up the country’s economy, which has been hit by the political crisis.
Nevertheless, the iShares MSCI Thailand Capped Fund (THD | B-96), the market’s only pure-play Thai-focused ETF, has been humming along, seemingly impervious to the storm clouds gathering in Bangkok. The fund is up 3.6 percent year-to-date, thanks to its portfolio, which steers away from industrial exporters listed on the stock exchange of Thailand and focuses more on foreign multinational companies.
Jim Rogers, the legendary commodity investor, thinks now is the time to buy Thailand. “Thailand has had dozens of coups in the last few decades, but they always start up again,” Rogers told ETF.com in an interview. “Buying during the coups and during civil unrest has usually been profitable.”