Global economic growth is expected to remain sluggish this year on a slowdown in major developing countries. However, India and country-specific exchange traded funds could lead the emerging markets.
India remains one of the best performing markets in the developing world. Over the past year, the WisdomTree India Earnings Fund (NYSEArca: EPI) rose 24.0%, iShares India 50 ETF (NasdaqGM: INDY) gained 26.9% and PowerShares India Portfolio (NYSEArca: PIN) increased 25.4%. [India ETF Plays to Capitalize on Moody’s Positive Economic Outlook]
The Indian markets could continue to outperform as the International Monetary Fund highlights the exceptional growth in India, Bloomberg reports.
The IMF now projects that India’s economy will expand at a 7.5% rate, up 1.2 percentage points from January’s forecast, potentially outpacing China’s expansion for the first time since 1999.
The country is turning around as reforms instituted by the Prime Minister Narendra Modi’s government helped bolster business investment and lower energy prices.
However, the Fund expressed growing concern over other key developing economies, including Russia, Brazil and South Africa.
Over the past year, the Market Vectors Russia ETF (NYSEArca: RSX) fell 14.9%, iShares MSCI South Africa ETF (NYSEArca: EZA) rose 6.8% and iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) plunged 26.4%.
The IMF predicts Brazil’s economy will contract 1% this year due to “stubbornly weak” private sector sentiment, corruption charges and efforts to diminish public spending and inflation, compared to expectations for a 0.3% growth at the start of the year.
The Fund also cut its earlier projections for an even deeper contraction in Russia, with output expected to diminish 3.8%, as volatility in the oil markets persist.
Meanwhile, China, the world’s second-largest economy, is slowing as “previous excesses in real estate, credit and investment continue to unwind,” according to the IMF. Nevertheless, Chinese stocks surprised investors this after the recent surge in prices. For instance, the iShares China Large-Cap ETF (NYSEArca: FXI) jumped 23.7% over the past month. [China ETFs Soar, but U.S. Investors Miss Out]
For more information on developing economies, visit our emerging markets category.
Max Chen contributed to this article.