Five Country ETFs Defying Global Weakness

August 30, 2012 /

Despite higher economic growth rates, emerging markets have lagged developed markets and the U.S. this year and last year. They’ve returned 5.57% year to date, while losing 0.25% the past 12 months. Developed markets rose 7.60% and 5.33% over those periods. The S&P 500 returned 13.77% this year and 22.56% the past 12 months.

But some corners of the developing world have reigned over all foreign market this year. Here’s an overview of ETFs tracking the five biggest foreign gainers this year in order of performance:

• Market Vectors Egypt Index ETF ( EGPT ): After cratering 52% following the revolution last year, the world’s No. 1 performing country rallied an eye-popping 46.72% year to date and 10.52% the past 12 months. The Middle Eastern come-back story has formally asked the International Monetary Fund for a $4.8 billion loan to rescue its economy. Should the deal fall apart though, the market could come crashing down, market watchers say. Investing in Egypt is highly speculative because it would still need more money and the uprisings have damaged the tourism industry, said Stuart Quint, international strategist at Brinker Capital in Berwyn, Pa.

• iSharesMSCI Turkey Investable Market Index ( TUR ) : Up 37.38% year to date and 19.85% in one year.

“Turkey is becoming a favorite emerging market again as growth has been exceeding expectations and inflation is trending downward,” said Brad Durham of EPFR Global. His data show that 4.3% of assets flowing into equity country funds this year traveled to Turkey — the third most popular destination this year behind the Philippines and Thailand.

The country revved up auto manufacturing as Detroit hit a wall. Its lira currency has spared it from the eurozone crisis and hasn’t needed IMF support. Foreign direct investments from both U.S. and European multinationals flow freely into the country thanks to its liberal investing climate.

“With its fully functioning democracy and economic opportunities abounding, Turkey is a shining light on the hill for regional economies looking to bolster their middle class and foster democracy,” said Ted Cominos, a private equity partner at Boston-based Edwards Wildman. He has consulted on a handful of venture capital and acquisition deals in the country.

• iSharesMSCI Philippines Investable Market Index ( EPHE ) : Up 21.92% year to date and 18.06% in 12 months.

Eight typhoons this year have drawn foreign aid, and rebuilding efforts should spur infrastructure spending. The archipelago attracted 5% of assets flowing into foreign funds this year, according EPFR.

“The peso has been appreciating and investor flows into the country have been favorable, causing the nation’s foreign reserves to climb to a record $79 billion,” said EPFR’s Durham.

• iSharesMSCI Thailand Investable Market Index ( THD ) Up 20.68% year to date and 13.85% the past 12 months.

“Following the Chinese model, Thailand is very pro-business and has developed infrastructure to make doing business within its borders easier, allowing it to maintain a very competitive edge over its regional peers,” said Dawn Bennett, CEO of Bennett Group Financial Services in Washington D.C. She expects Thailand to continue outperforming this year.

• iSharesMSCI Mexico Investable Market Index ( EWW ) Thanks in part to the peso’s 5% climb against the dollar this year, it’s added 16.43% year to date and 13.91% the past 12 months.

Mexico will soon replace China as the premier global manufacturer for shipments to North and South America, said Carl Delfeld, founder of PacificRimConfidential.com.

“American, European, Japanese, South Korean and, yes, even China are falling over each other to invest in Mexican production facilities,” he said. “Eighty percent of Mexico’s exports are manufactured goods and trade now represents 60% of GDP.”

 

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