The long-term case for investing in emerging markets is based on growing worldwide demand for commoditiesand the expansion of an enormous new middle class in those countries.
That said, the strongest case can be made for those countries with the least reliance on exports and the overall health of the U.S. and euro zone economies.
“The most visible forms of growth are domestic demand consumption in emerging markets,’’ says Stephen Parr, an emerging markets portfolio manager with Aberdeen Asset Management.
Parr sees opportunities in the build-out of infrastructure and telecommunications in countries like India and Turkey. Ultratech, an Indian cement producer, is a key player in the urbanization trend taking over the country.
You can tap Indian stocks through several ETFs, including the WisdomTree India Earnings Index and PowerShares India Portfolio .
In Turkey, Parr favors well-managed construction companies and banks with conservative balance sheets. Financial stocks make up close to half of the iShares MSCI Turkey Investable Market Index . Telecom companies that sell data services like China Mobile are additional plays on the modernization of EM economies.
Consumer demand for services is another theme Aberdeen is tapping through an overweight in consumer staples, energy, healthcare and financial/real estate stocks. Hong Kong real estate developer Hang Lung Group, for example, generates strong cash flow, allowing it to be patient in developing high-end malls that cater to Chinese demand for luxury goods.