Believe In T. Rowe Price? Invest In These EM ETFs
Worries over the emerging market (EM) bloc are piling up on the impending Fed tightening, commodity market crash, slowing growth and currency weakness. If this was not enough, China – the largest emerging market – is seeing a serious upheaval in its financial market and economy and sending shockwaves to the entire EM bloc. Several hedge funds are cutting their stake in EM equities and ETFs in the wake of the Fed move. Capital inflows to emerging markets are likely to turn negative this year for the first time since 1988. The fund outflows ($12.4 billion) in Q3 were the highest since the first quarter of 2014 when the emerging market funds bled $12.7 billion in assets. In September, emerging market ETFs witnessed $1.9 billion of extraction. Though bond funds were also unsteady, equities were hit hard. Two top EM ETFs – Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ) and iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) – have shed 12% and 10.6% so far this year (as of November 20, 2015). However, not all emerging markets are seeing the same downtrend at least, if we are to go by T. Rowe Price , an American publicly owned investment firm. As per the organization, an improving U.S. economy will lug along other regions of the world including this vulnerable part, though a short-term setback in EM securities can’t be overruled. Moreover, the organization remains upbeat on several specific economies. Below we highlight those economies and their respective ETFs for investors who want to follow T. Rowe Price. Philippines T. Rowe Price described this economy as bearing all the features investors look for in an emerging market, i.e. growth, great demographics and a current account surplus. The Philippine economy recorded 66 successive quarters of economic growth. Barclays indicated that the economy has grown 6% on average per annum under the current administration, while inflation stayed at 3.7%, which is quite commendable as per the standard of emerging markets, per Financial Times. The Philippines economy grew 5.6% in the second quarter of 2015, which is still a strong growth rate compared with other developed economies. This calls for a look at iShares MSCI Philippines ETF (NYSEARCA: EPHE ). The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. EPHE is down 9.6% so far this year (as of November 20, 2015). India Though India’s economic growth slowed to 7% in the June quarter, consecutive interest rate cuts, decline in sky-high inflation, still-laudable economic growth and hopes of pro-growth policy reforms under the ministry of prime minister Narendra Modi put India investing in the best position in the BRIC bloc. An acute plunge in oil prices also went in favor of the huge oil-importing nation India. Currency condition is also not as vulnerable as it was in 2013 when taper talks ravaged the EM equities. Greenback gained about 2% against the Indian rupee in the last one month. Thus, India ETFs like PowerShares India Portfolio (NYSEARCA: PIN ), iShares MSCI India ETF (BATS: INDA ) and EGShares Indxx India Small Cap Fund (NYSEARCA: SCIN ) can be followed. However, each of these three ETFs is in red this year. PIN and INDA has lost about 8% while SMIN is down 1.7%. Indonesia T. Rowe Price views Indonesia as a contrarian bet and seeks bottom fishing. Indonesia ETFs have seen a horrendous sell-off this year and the worst-performing emerging market ETFs in the year-to-date frame. MSCI Indonesia ETF (NYSEARCA: EIDO ) is down about 22.3% so far this year. However, such a beating has made the Indonesia ETF fairly valued at the current level. Also, stimulus packages announced by its pro-growth President Joko Widodo put this largest Southeast Asian economy on watch for gains. In the last one month (as of November 20, 2015), U.S. dollar was over 2% up against the Indonesian Rupiah. T. Rowe Price has termed Indonesia as the ‘India of tomorrow’. Peru T. Rowe Price has a choice in the struggling Latin American pack too, i.e. in Peru. The country is famous for the production of this metal, the price of which has slid steeply this year. Peru’s economy will likely expand 3.9% year over year in Q4 and close out 2015 with a growth rate of about 3%, as per a central bank official . This will miss the central bank’s prior full-year growth forecast of 3.1% by a slight margin. The bank official went on saying that the economy’s 2016 growth will be 4.2%, unless an adverse weather condition hits the economy. Investors can play this growth via iShares MSCI All Peru Capped ETF (NYSEARCA: EPU ). Peru ETF has lost over 30% so far this year (as of November 20, 2015). Original Post