Is the Rally in Emerging Market ETFs for Real?

As we see glimmers of renewed life in the markets, investors are left wondering if this bull rally, especially in emerging markets and subsequent exchange traded funds (ETFs), is not just some ephemeral occurrence.

Mark Mobius, executive chairman of Templeton Asset Management Ltd., says we are just at the starting line for the next “bull-market” rally for developing nations, reports Anthony Massucci for Daily Finance. After the U.S. Treasury vowed to help the banking system, stocks around the glob rallied and Mobius sees bargains in every emerging market.

Back in December, Mobius precisly foresaw a faster rebound in emerging markets compared to developed nations. He now looks to companies rich with cash, low in debt, high in dividend yeilds and maybe some companies that offer dividends while investing in growth.

There are some analysts who caution investors, saying the current rally may turn a complete 180 on us, but most analysts and fund managers now think a market bottom has gone by after a lengthened rally.

In emerging European markets like Russia, higher energy prices has helped boost Russian markets, which have outperformed other emerging economy securities, according to The International Herald Tribune. Nevertheless, The Finance Minister Kudrin cautions against “excessive optimism.”

The Russian Economy Ministry expects lower GDP figures for the second and third quarters but there may be growth in the fourth quarter, as stated in Cbonds. Inflation has abated some in March. For 2009, the GDP is likely to fall 2.2%, investments may diminish 13.8%, but trade could grow 0.3%.

Watch the trend lines and have a strategy to see where this rally goes and to protect yourself.

• Market Vectors Russia ETF (RSX): up 16.4% year-to-date

• iShares MSCI Emerging Markets Index (EEM): up 1.3% year-to-date

• SPDR S&P Emerging Europe (GUR): up 0.1% year-to-date

Disclosure: Tom Lydon has clients who own shares in EEM.

Max Chen contributed to this article.