The iShares MSCI Turkey ETF (NasdaqGM: TUR) is off almost 25% over the past month, a slide that is plaguing the broader emerging markets complex. As Turkish equities have tumbled, the MSCI Emerging Markets Index has seen its year-to-date loss approach 9%.
However, some market observers believe emerging markets assets offer long-term opportunity. Prescient investors could see the opportunity in the dip given the cheaper valuations as well as their current market cycles relative to the U.S. capital markets’ late cycle.
“We see many of these problems as unique to Turkey, yet other EMs have felt the heat. We remain wary of markets with high debt and deteriorating growth, and see long-term opportunities in regions with sound fundamentals, such as EM Asia,” said BlackRock in a note out Wednesday.
If emerging markets can effectively deflect the geopolitical news and investors can focus on fundamentals, it could be opportunities in the international space that will take the helm as the capital markets in the U.S. delve deeper into their late cycle.
Accessible Ideas for Emerging Markets
The iShares MSCI Emerging Markets ETF (NYSEArca: EEM), Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) are among the most popular options for broad-based exposure to developing economies. Each of those funds feature significant exposure to emerging Asian markets.
“Many other EM countries, especially in Asia, appear healthier with improving current account balances. And structural reforms in countries such as China and India are likely to put economies on the path to more sustainable, long-term growth, in our view,” according to BlackRock.
Related: 4 International ETFs To Capitalize on Potential Turnaround
Despite the relative weakness year-to-date in emerging markets ETFs, other market experts may view them as underpriced based on a price-to-estimated earnings ratio that is at its lowest within the last two years. The ratio for the MSCI Emerging Markets Index is below its historical average of 11.4, reaching about 11.2–signs that possible buying opportunities exist.
“We recommend sticking with markets with strong fundamentals and companies with strong balance sheets. China’s growth is poised to benefit from policy support in the near term. China and India are two of our top EM Asia equity picks,” adds BlackRock.
For more ETF trends in emerging markets, click here.
Tom Lydon’s clients own shares of VWO.