Falling Commodity Prices a Boon for Some EM ETFs

The weakness in the commodities market could help alleviate inflationary pressure in developing economies and bolster some emerging market stocks and exchange traded funds.

According to Credit Suisse, cheaper commodities prices could diminish aggregate emerging market inflation, excluding China and India, by one to 6.6 percentage points by the end of 2015, reports Simon Kennedy for Bloomberg.

Specifically, commodity importers or countries with more stable currencies could benefit from the cheaper raw materials, including South Korea, Taiwan, the Philippines, eastern European countries, Turkey and South Africa.

Investors interested in the South Korean markets can take a look at broad country-specific ETFs, like the First Trust South Korea AlphaDEX Fund (NYSEArca: FKO), iShares MSCI South Korea Capped ETF (NYSEArca: EWY), SPDR MSCI South Korea Quality Mix ETF (NYSEArca: QKOR) and Horizons Korea KOSPI 200 ETF (NYSEArca: HKOR). Additionally, the WisdomTree Korea Hedged Equity Fund (NasdaqGM: DXKW) and db X-trackers MSCI South Korea Hedged Equity Fund (NSYEArca: DBKO) both try to limit the effects of currency fluctuations and could underperform non-hedged ETFs if the won currency  strengthens against the U.S. dollar.

For Taiwan market exposure, the iShares MSCI Taiwan ETF (NYSEArca: EWT), First Trust Taiwan AlphaDEX (NYSEArca: FTW) and SPDR MSCI Taiwan Quality Mix ETF (NYSEArca: QTWN).

The iShares MSCI Philippines ETF (NYSEArca: EPHE) is the only U.S.-listed ETF to track the Philippines.

The iShares MSCI Emerging Markets Eastern Europe Index Fund ETF (NYSEArca: ESR) and SPDR S&P Emerging Europe ETF (NYSEArca: GUR) both provide exposure to emerging eastern European countries. ESR has a heavier tilt toward Russia at 67.8%, followed by Poland 25.2%. GUR includes a 46.3% weight toward Russia, followed by Turkey 40.7% and Poland 19.0%.

The iShares MSCI Turkey ETF (NYSEArca: TUR) is the only U.S.-listed ETF to track Turkey’s market. [Turkey ETF was no Turkey in October]