Some Bright Spots in Emerging Market ETFs
August 14th at 12:00pm by Tom Lydon
Emerging markets have been clobbered this year, but exchange traded funds that track Mexico and Chinese small-caps are picking up speed off their June low.
David Fabian of Fabian Capital Management on ETF Daily points out that the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) has experienced a sharp rally over the last six weeks. [This LatAm ETF Could be a Leader Again]
EWW has gained 17.2% since its recent low on June 20 and is now testing its long-term 200-day simple moving average. A move above the trend line would mark a significant technical indicator for further upside.
Looking at Mexico, the government is also implementing social and economic reforms that would stir investor demand. Additionally, the recovering U.S. economy will also help our trading partner.
EWW’s top three sectors include consumer staples, telecom services and materials, which make up 61% of the overall portfolio. The fund is also heavily allocated toward America Movil at 18%. The ETF has a 0.50% expense ratio.
Additionally, the Guggenheim China Small Cap ETF (NYSEArca: HAO) has also seen quick rebound over the past couple of weeks.
HAO has gained 13.4% since its low on June 24 and is also testing its 200-day average.
As a small-cap oriented fund, the ETF focuses on China’s domestic growth. Many observers believe that China is beginning to shift from an export heavy economy to more sustainable growth through domestic consumption. [ETF Chart of the Day: China]
The China small cap ETF has 49% of its holdings allocated toward industrials, financials and consumer discretionary. The fund avoids many of the large-cap, state run companies found in other China ETFs. HAO has a 0.75% expense ratio.
For more information on developing economies, 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. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.