4 Emerging Markets ETFs To Consider Buying
Zacks Investment Research | Feb 26, 2015 12:39AM ET
Emerging Markets (EM) are receiving back-to-back positive signals in the form of cheap cash inflows. Hot money, which flowed in only from the U.S. till last year, will now come also from the Euro zone, which has launched its own QE this year. Moreover, since the Fed seems in no rush to hike the key U.S. rates, EM ETFs are likely to see a surge of investments despite the QE wrap-up in the U.S.
The enthusiasm is validated from the fact that the (ARCA:SPY) ETF has added about 2.8% so far this year (as of February 23, 2015) while Vanguard Emerging Markets ETFs (ARCA:VWO) is up about 4.4%. Currently, SPY is trading with a P/E (ttm) ratio of 17 times while VWO is much cheaper--trading with a P/E (ttm) of 13 times.
However, although emerging markets investments drew significant interest from the developed nations in the past decade, they are traditionally considered as riskier proposition than domestic investments. So, before plunging into a broader emerging market pool, investors need to carefully weigh up the country-specific strengths.
Per analysts, Asian earnings are rising presently while corporate Latin America is lagging. As a result, investors are naturally bent on Asia-heavy funds now instead of South America which is essentially commodity rich and witnessing a choppy spell in the commodity market downturn.
On the other hand, most Asian emerging markets are benefitting from the commodity market slump especially low oil price (Read: Beyond India: Look at These Overlooked Broad EM ETFs ).
iShares Asia 50 ETF (NYSE:AIA)
The fund gives exposure to 50 important companies from Asian countries including China (41.7%), South Korea (21%), Taiwan (18.1%), Hong Kong (10.2%) and Singapore (7.5%). The fund invests about $367 million in assets in 51 stocks. The fund is heavy on Samsung (11.01%) followed by 6.6% of assets invested in Tencent and 6.54% assets in Taiwan Semiconductor.
The fund charges about 50 bps in fees. It is up 4% this year and is trading with a P/E (ttm) of 11 times presently (as of February 23, 2015).
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