Currency Pain Hits Emerging Market ETFs

January 13, 2016

YTD Returns For The Rand, EZA, And The MSCI South Africa Index

Brazil & Russia Spiral Lower

Another pair of poor-performing emerging markets is Brazil and Russia, which make up 6.5% and 4.2% of the FTSE Emerging Markets Index, respectively.


Once again, the currency impact is notable when it comes to these two countries. Russia's ruble already lost 4.9% against the U.S. dollar this year after a 19.4% slide last year. At the same time, Brazil's real shed 1.6% so far this year after tanking 49% in 2015.

Add in dismal economic fundamentals for both countries, and it's easy to see why ETFs related to these countries are down significantly this year.

Russia continues to struggle under the weight of crumbling oil prices and Western sanctions; in turn, the Market Vectors Russia ETF (RSX | B-71) has sagged 10.2% year-to-date.

Meanwhile, Brazil faces sky-high inflation, a deep recession and political turmoil amid the potential impeachment of the country's president. The iShares MSCI Brazil Capped ETF (EWZ | B-96) lost 8.6% so far this year, putting it at its lowest point in more than a decade.


YTD Returns For EWZ, RSX

India Not Immune

Even India, the turnaround story in emerging markets and a darling of many investors, hasn't been immune from the plunge in emerging markets.


Last year, the iShares MSCI India ETF (INDA | C-96) fell by 7.1%, and so far in 2016, it's already down 4.8%.

Many investors, including bond guru Jeffrey Gundlach, remain bullish on the long-term prospects for India under the leadership of business-friendly Prime Minister Modi. However, it's hard to see stocks in any particular emerging market, India included, advancing until the broader sell-off in the space abates.


Contact Sumit Roy at [email protected].

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