Since the calendar switched over to the new year, little has changed in emerging market exchange traded funds (ETFs). In fact, if anything, the picture has gotten a little bit better despite today’s blip.
- Productivity Improving. China and India have long been desired locations for American corporations to find cheap labor. That relationship has a new facet: those employees are not only simply cheap, they’re increasingly productive, reports Jon Hilsenrath for The Wall Street Journal. [How emerging markets are beating their risky reputation.]
- The Conference Board compared productivity trends across 111 countries and found growth in output per worker in developing economies while developed country productivity wanes. The measure of worker productivity called “total factor productivity (TFP),” which works out productivity improvements that come from firms investing in new technology or hiring better-educated workers is what emerging markets are gaining on. In emerging economies, TFP rose at an annual rate of 2.4% from 2005 to 2008, compared to 0.2% in advanced economies. [How to invest globally with ETFs.]
- The Great Frontier. Kejal Vyas for The Wall Street Journal reports that as emerging economies are becoming more expensive from an investment standpoint, frontier markets are showing plenty of opportunity. Frontier market stocks, as tracked by MSCI, have gained about 21% in the last year. The MSCI Emerging Markets measure, meanwhile, has more than doubled. Although there is extra risk tied to these economies, the rewards can be greater. [We’ve heard about the BRICs, now the MAVINS?]
- Economic Freedom. The Index of Economic Freedom saw a major shift recently: the United States saw its position decline to eighth place, bested primarily by Asian economies. Hong Kong took the top spot, followed by Singapore, Australia and New Zealand. Economic freedom measures how free citizens of a particular country are to work, produce, consume and invest how they please. The United States’ ranking dropped as a result of government intervention and a rapidly rising deficit.
- Global GDP. Emerging markets account for 50% of global gross domestic product, and counting. In fact, between 2008 and 2025, developing economies are projected to account for more and more of global GDP, according to research by PricewaterhouseCoopers.
There are dozens of ways to get exposure to emerging markets, including through some of the ETFs below. Keep in mind that the narrower the focus, the greater the risk. When it comes to emerging markets, keep your investment strategy in your back pocket and have a stop loss in place before you invest. [How to follow trends.]
For more stories about emerging markets, visit our emerging markets category.
- Vanguard Emerging Markets ETF (NYSEArca: VWO)
- iShares MSCI Emerging Markets (NYSEArca:EEM)
- EGS Dow Jones Emerging Markets Titans Composite (NYSEArca: EEG)
- SPDR S&P Emerging Markets (NYSEArca: GMM)
- Schwab Emerging Equity Markets ETF (NYSEArca: SCHE)
- GlobalShares FTSE Emerging Markets Fund (NYSEArca: GSR)
- iShares MSCI Brazil Index (NYSEArca: EWZ)
- SPDR S&P China (NYSEArca: GXC)
- iShares MSCI Chile Index ( NYSEArca: ECH)
For full disclosure, Tom Lydon’s clients own shares of EEM and VWO.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.