ETF Strategist - Fixed Income

An Emerging Markets ETF Portfolio for Bears

Mark McLaughlin,|Special to

Emerging markets have made great strides in the last decade as a viable option for investment.

Neveretheless, despite more prudent economic policies, improved corporate governance and lower debt levels, the asset class remains susceptible to political risk, market manipulation, and limits on foreign investment. In addition, emerging market risks tend to become magnified in market downturns.

For investors fearful of a global recession and its ill effects on emerging markets, ProShares Short MSCI Emerging Market allows you to bet broadly against developing world stocks.

Some bears believe the spread of the eurozone debt crisis to neighboring parts of Europe will hold back the economies of countries such as Hungary and Poland.

Since exchange traded fundstrade like stocks, you can short sell them to benefit from price declines.

ShortingSPDR S&P Emerging Europeis a way to profit from mediocre growth prospects in the region.

Should China fail to engineer a soft landing for its economy, its voracious appetite for raw materials could decline and pull down the fortunes of South American exporters like Brazil and Peru.

Likewise, slowing global demand for finished goods like smart phones and flat panel TVs could shake the health of producer nations like Taiwan.

Shorting ETFs that target these countries and regions are another tactic for EM bears.

Emerging Markets ETF Portfolio for Bears - Short