Investors Get Selective in Emerging Markets ETFs

May 9th at 7:12am by Tom Lydon

The blind rush to emerging market exchange traded funds (ETFs) is slowing down as investors begin to selectively pick out potential winners from losers.

The markets were pleased with the higher percentage of corporations that beat their earnings and revenue forecasts, and investors have taken this mindset to include emerging market holdings, writes Gary Gordon for SeekingAlpha.

Gordon points out that investors are favoring dividend-oriented or equity income emerging market ETFs, such as the WisdomTree Emerging Market Small Cap Dividend (NYSEArca: DGS), WisdomTree Emerging Market Equity Income (NYSEArca: DEM) and SPDR Emerging Market Dividend Fund (NYSEArca: EDIV) while iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) and Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) have been lagging behind.

Emerging income and emerging dividend investors receive an income stream from less volatile holdings in economically sensitive, inflation-anticipating emerging markets, remarks Gordon.

 

Russ Koesterich and Nelli Oster, strategists at iShares, comment that developing markets are attracting more investors due to strong earnings growth, relative cheapness as compared to emerging markets, inflationary pressures in large emerging markets and a risk averse market atmosphere.

However, iShares believes that investors will begin to stay away from basket emerging market ETFs and start picking out country-specific investment strategies for the immediate short-term as a result of diverging performances between emerging countries and regions.

In India, Reserve Bank of India Governor Duvvuri Subbarao stated that the recent rate hike of 50 basis points will help sustain high growth in the medium term, reports Manojit Saha for Rediff. Subbarao also said that while March inflation numbers was an attributing factor, inflationary pressures was not the only reason for the rate hike.

  • WisdomTree India Earnings Fund (NYSEArca: EPI)
  • PowerShares India Portfolio (NYSEArca: PIN)

For more information on the emerging markets, visit our emerging markets category.

Max Chen contributed to this article.

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.