The developing world is showing uneven growth, with countries like Russia and Brazil floundering. Consequently, investors should pick their spots in the emerging markets and pay particular attention to exchange traded funds that track tech-heavy Taiwan, India, China and Korea.
The deepening recession in Brazil and Russia have weakened the BRICs – Brazil, Russia, India and China – investment thesis. Alternatively, emerging market fund managers may replace the group with the TICKs, using tech-heavy Taiwan and Korea as a replacement to commodity-focused Brazil and Russia, reports Steven Johnson for the Financial Times.
“BRIC is not the engine of emerging market growth it was. There is a new order of things,” Steven Holden, founder of Copley Fund Research, told the Financial Times. “Tech is just rampant and the consumer is what you are investing in EMs now. I don’t think many people are aware of the new EM story as much as they should be. They think of Brazil, Russia, materials, big energy companies. That has changed hugely.”
Fund managers are already making the shift. For instance, as of December, 63% of funds held at least 50% of assets in TICK countries. JPMorgan, Nordea and Swedbank have at least 35% in Taiwan and Korea in some of their funds while Carmignac, Fidelity and Baillie Gifford have 3% or less in Brazil and Russia.
ETF investors can gain targeted exposure to TICK countries through country-specific ETFs.
For Taiwan market exposure, investors can look to the iShares MSCI Taiwan ETF (NYSEArca: EWT), First Trust Taiwan AlphaDEX (NYSEArca: FTW) and SPDR MSCI Taiwan Quality Mix ETF (NYSEArca: QTWN).
ETF investors can also gain targeted exposure to India through the iShares MSCI India ET (NYSEArca: INDA), PowerShares India Portfolio (NYSEArca: PIN) and WisdomTree India Earnings ETF (NYSE: EPI).
The iShares China Large-Cap ETF (NYSEArca: FXI) is the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange. Investors can also use China A-shares ETFs that track mainland Chinese stocks traded in Shanghai and Shenzhen plunged Friday, with the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR). Additionally, investors can focus more on China’s tech space through the broad Powershares Golden Dragon China Portfolio (NYSEArca: PGJ), which includes a hefty 43.6% tilt toward information technology companies.