Emerging Market ETF Trouble Spots

Emerging market exchange traded fund investors should watch out for potential trouble spots after the International Monetary Fund cut its global economic forecast on Tuesday, pointing to notable weakness in some developing economies.

“While growth in emerging market and developing economies still accounts for the lion’s share of projected world growth in 2016, prospects across countries remain uneven and generally weaker than over the past two decades,” the IMF said in its April 2016 World Economic Outlook.

Specifically, the IMF singled out oil exporters Brazil and Russia, which continue to languish in a recession and are projected contract 3.8% and 1.8% in 2016, respectively, reports Katy Barnato for CNBC.

“Several large emerging market economies face deep contractions due to internal political strife or geopolitical pressures and a number of low-income countries suffer El Nino-related drought or flooding. The costs could escalate,” IMF Chief Economist Maurice Obstfeld told a media conference.

For instance, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) has declined 18.7% over the past year as the government miss managed its finances and a corruption scandal shook the markets. Nevertheless, EWZ has surged 31.5% year-to-date on speculation that the country is moving past a political gridlock that could lead to changes in the government and potentially kick-start the stagnate economy.