Emerging markets and country-specific exchange traded funds rallied Monday as a risk-on environment helped attract investors to some beaten down areas of the global market.
On Monday, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) was 1.4% higher and iShares MSCI Emerging Markets ETF (NYSEArca: EEM) was up 1.5%. Year-to-date, VWO and EEM dipped 6.6%.
“I see a turning point for emerging markets,” Mark Mobius, Executive Chairman of Templeton Emerging Markets Groups, told Bloomberg. “Probably at the end of this year, we’ll see emerging markets emerging again.”
Mobius argues that the downturn in countries like Brazil makes it a “wonderful time to be buying.”
The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) was also one of the better performing developing markets on Monday, rising 3.4%. EWZ fell 3.2% year-to-date and plunged 41% over the past year.
Moreover, Mobius believes some commodity producers are becoming more attractive. Xu Lirong, Chief Investment Officer of Franklin Templeton Sealand Fund Management Co., Ltd. – a Franklin Templeton’s Chinese joint venture – also said he’s acquiring commodity producers.
The rebounding oil prices has bolstered emerging economies that rely on energy exports. For instance, the iShares MSCI UAE Capped ETF (NasdaqGM: UAE) gained 5.5% and Market Vectors Russia ETF (NYSEArca: RSX) rose 3.1% on Monday.
Moreover, the strengthening developing country currencies are also adding to the rally in emerging market equities. For instance, the iShares MSCI Turkey ETF (NYSEArca: TUR) increased 3.2% after Turkey retained its investment-grade status.
“Emerging markets are trying to bottom,” Hertta Alava, head of emerging markets at FIM Asset Management Ltd, told Bloomberg. “Considering how bearish the mood has been lately, a relatively weak scenario might be priced in already. So, there could be room for positive surprises.”
Other emerging markets that led the bounce on Monday include iShares Indonesia Investable Market Index Fund ETF (NYSEarca: EIDO) up 3.3%, iShares MSCI South Africa ETF (NYSEArca: EZA) up 3.0% and Global X FTSE Greece 20 ETF (NYSEArca: GREK) up 2.5%.
Max Chen contributed to this article.
CORRECTION: updated Mobius’ and Lirong’s title.