Once China starts thriving, China’s trade partners will be in a position to gain from the increased trading traffic, and this may be reflected in their markets along with subsequent exchange traded funds (ETFs).

China and Brazil’s growing relationship has helped foster boosts in Brazil’s markets, MSCI Brazil Index Fund (EWZ), which is up 14.6% in the last month and up 20.4% in the last three months, along with China’s. After China announced its plans for a stimulus package, markets of its trading partners, Singapore and Hong Kong, both moved up, writes Gary Gordon for ETF Expert.

ETF EWZ performance

Potential bargain hunters may be enticed by single digit P/Es and dividend yields of iShares MSCI Hong Kong Index (EWH), which is up 10% in the last month and iShares MSCI Singapore Index (EWS), which is up 7.2% in the last month and down 5.9% in the last three months. EWH has a P/E ratio of 9.2% and a dividend yield of 7.4%, while EWS has a P/E ratio of 9.7% and a dividend yield of almost 10%.

ETF EWH performance

ETF EWS performance

Note that all three funds have moved above their short-term trend lines.

The institute for International Finance has estimated that bank loans and private non-bank debt investment in emerging markets will decline in 2009, leaving the countries with strong balance sheets to come out on top.

Brazil may do pretty well with a strong domestic savings base, interest rates higher than inflation and a more open policy toward foreign direct investments. Singapore also has large reserves on hand and little debt, and it could even be Singapore that will be lending to other emerging markets.

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.