Emerging markets exchange traded funds are shaking off some of the lethargy caused by investors’ knee-jerk reactions to Donald Trump’s surprise victory in the November U.S. presidential election. In fact, some emerging markets ETFs have recently been printing new highs.
That includes the Schwab Fundamental Emerging Markets Large Company ETF (NYSEArca: FNDE). FNDE is rapidly becoming one of the dominant names among smart beta emerging markets ETFs, an asset class usually dominated by plain vanilla cap-weighted funds.
FNDE tracks the Russell Fundamental Emerging Markets large Company Index, which selects, ranks and weights components based on fundamental factors like adjusted sales, retained operating cash flow and dividends plus buybacks.
“FNDE has now gained 56.26% from its 52-week low, which was hit back on January 25, 2016. The fund has now returned 8.76% over the past month, 5.89% over the past three months, and 14.61% in the past six months. Those returns compare very favorably to the benchmark S&P 500 index’s 0.19%, 6.43%, and 5.47% returns in the same periods, respectively. It’s becoming clear that Emerging Markets Equities — especially large cap names — are outperforming their U.S. counterparts,” according to ETF Daily News.
Five countries – Brazil, South Korea, Russia, China and Taiwan – have double-digit allocations in FNDE. With those large weights to Brazil and Russia along with an almost 26% weight to the energy sector, its largest sector weight, FNDE does feature exposure to oil prices. Financial services, technology and materials names combine for about half of FNDE’s weight.
On a technical basis, FNDE currently looks strong.
“FNDE currently sits above its 10-day, 20-day, 50-day, 100-day, and 200-day moving averages (MAs), which from a technical standpoint suggests a very strong possibility that the recent gains can continue. That’s because the shares have no short-term overhead resistance to bump up against. In fact, FNDE is coming within striking distance of its all-time highs around $29 set back in September 2014,” according to ETF Daily News.
Although some developing economies have been viewed as vulnerable to Donald Trump’s presidency and there are concerns about the impact of interest rate increases by the Federal Reserves on emerging markets that have to service dollar-denominated debt, some market observers believe emerging equities can perform well again in 2017. FNDE is up more than 8% just this month.
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