ETF Strategist - Fixed Income

Emerging Markets Bulls Dismiss China Slowdown

Mark McLaughlin, |Special to

Exchange traded funds and emerging market investments seem made for each other.

The specialization of ETFs enables investors to seek broad exposure across the three major emerging marketsregions (Asia, South America, Europe/Africa/Middle East) or home in on single countries.

The uncertainty of demand in developed markets has EM bulls targeting countries with strong domestic fundamentals like South Africa, South Korea and Thailand through single-country ETFs like iShares MSCI South Africa , and regional ones such as SPDR S&P Emerging Asia Pacific.

If you’re confident that fears of a slowdown in China are overblown, then targeting EM stocks through an ETF focused on the BRIC countries provides exposure to the export power of Brazil and Russia and burgeoning consumer demand in India and China.

Local EM bond markets also appear well positioned, thanks to strong economic growth and the ability to offer higher yields than those available in developed markets.

Investors can gain yield plus the potential for foreign exchange gains by holding ETFs, like WisdomTree Emerging Markets Local Debt Fund, which own bonds denominated in local currencies.

The following ETFs offer focused exposure to EM regions with the most promise over the next 12 months.

Emerging Market Bull Portfolio