Investors have been piling into ETFs indexed to China and Brazil hoping to profit from the developing countries’ higher economic growth rates and lower debt levels.
For example, iShares FTSE China 25 (NYSEArca: FXI) and iShares MSCI Brazil (NYSEArca: EWZ) are both among the top 10 best-selling ETFs since the end of September.
FXI has netted $1.1 billion while investors have added $579 million to EWZ, according to IndexUniverse ETF flow data.
Brazil and China are among the so-called BRIC nations along with emerging markets Russia and India. Last month, reports surfaced that the BRICS were considering launching a multilateral bank.
In October, China-focused funds were the most popular in the emerging markets ETF category with inflows of $2.8 billion, according to BlackRock global ETF flow data. Brazil ETFs attracted $700 million.
“Central banks in China and Brazil have aggressively lowered interest rates in 2012,” BlackRock said in a note.
EWZ has been a favorite among hedge fund manager for exposure to Brazil, the world’s sixth largest economy and home to the upcoming 2014 World Cup and 2016 Summer Olympics. [Brazil ETF Still Raking in Cash]
Meanwhile, investors are coming back to the China fund FXI amid a recent bounce after dreadful performance through most of 2012.
Since the end of August, FXI has rallied 14%. Still, the China ETF is down about 10% year to date.
Chinese stocks have been punished on concerns the world’s second-largest economy and key driver of global growth is facing a hard landing.
“China’s growth is still robust and is enviable when compared to the U.S. and Europe,” TheStreet’s Chief Investment Officer Stephanie Link tells Trader Planet. “Inflation has come down from very high levels and is poised to settle down as China contemplates more stimulus via bank rate reductions.”
ETF investors who want to take a more diversified approach to BRICs can consider iShares MSCI BRIC Index Fund ETF (NYSEArca: BKF), Guggenheim BRIC ETF (NYSEArca: EEB) and SPDR S&P BRIC 40 ETF (NYSEArca: BIK).
iShares FTSE China 25
The opinions and forecasts expressed herein are solely those of John Spence, 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.