Political Events Can Impact Emerging-market ETFs

Emerging markets and their exchange traded funds (ETFs) appear as if they are stabilizing despite the subprime storm. iShares MSCI Emerging Markets Index (EEM), for example, is up 5.6% since the market low on August 15 and is up 0.3% for the last three months. Economic growth, an increasing middle class and political stability have been some of the largest influential factors in helping these areas begin to rebound.

While it’s clear the global credit crunch has affected these ETFs, if political strife were to envelop an emerging-market country, it could have far worse effects, says Carl Delfeld for ETF XRAY. Take Thailand for example. When its military launched a coup against the country’s prime minister, several Asian ETFs dropped. Investors who are invested in emerging markets need to watch political events in those countries closely as these ETFs can be more susceptible to political influences. Some other emerging-market ETFs that launched in March include:

• SPDR S&P Emerging Markets (GMM)
  This ETF has more than 1,500 companies across 26 emerging countries. It’s up 1.4% for the last three months.
• SPDR S&P Emerging Latin America (GML)
  This ETF includes companies based in Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela. It’s down 3.3% for the last three months.
• SPDR S&P Emerging Middle East & Africa (GAF)
  GAF includes companies based in Egypt, Israel, Jordan, Morocco, Nigeria and South Africa. It’s down 8.1% for the last three months.