As the rally in U.S. equities gets long in the tooth, investors should consider rotating into developing economies and emerging market-related exchange traded funds.
Joseph Mark Mobius, emerging market fund manager for Franklin Templeton Investments, argues that investors should think about shifting into better-performing emerging markets, reports Ansuya Harjani for CNBC.
For instance, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), which tracks the FTSE Emerging Index, and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which follows the MSCI Emerging Markets Index, are both up 8.6% year-to-date while the S&P 500 index has gained 2.6%.
Moreover, for those concerned about foreign exchange risks with the U.S. dollar strengthening, the iShares Currency Hedged MSCI Emerging Markets ETF (NYSEArca: HEEM) and the Deutsche X-trackers MSCI Emerging Markets Hedged Equity Fund (NYSEArca: DBEM) track developing markets while hedging against depreciating overseas currencies. Year-to-date, HEEM rose 9.3% and DBEM gained 7.5%.
Mobius is bullish on Asian markets, notably China, Indonesia, Thailand and Taiwan, arguing that the region is well-placed to weather volatility from a U.S. rate hike ahead.
“China is number one because of the variety and choices we have particularly now with the connect program,” Mobius said, referring to the Shanghai-Hong Kong connect scheme. [China H-Shares ETFs Still Look Attractive]
Investors interested in the Chinese markets can select from a range of ETF options. For instance, the iShares China Large-Cap ETF (NYSEArca: FXI) and SPDR S&P China ETF (NYSEArca: GXC) both track Chinese companies listed on the Hong Kong exchange. Additionally, the Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) was the first U.S.-listed ETF to offer physical exposure to mainland A-shares stocks. Year-to-date, FIX rose 21.1%, GXC gained 19.1% and ASHR returned 24.8%. [A-Shares ETF Soars, Crimps Bearish Options Buyers]