Emerging markets (EM) were one of the hardest hit as the COVID-19 pandemic ravaged the global economy. Yet the tide could be turning. ETF investors looking to get in on EM economies can take a look at the Invesco DWA Emerging Markets Momentum ETF (PIE).
The fund seeks to track the investment results (before fees and expenses) of the Dorsey Wright® Emerging Markets Technical Leaders Index (the “underlying index”). The fund will invest at least 90% of its total assets in the securities that comprise the underlying index.
The Index includes approximately 100 companies from the Nasdaq Emerging Markets Index that possess powerful relative strength characteristics and are domiciled in emerging market countries including, but not limited to Brazil, Chile, China, India, Indonesia, Philippines, South Africa, Thailand, and Turkey. The Index excludes US companies listed on a US stock exchange. The Index is computed using the net return, which withholds applicable taxes for non-resident investors.
After starting the year strong, the EM space took a hit like the rest of the world, but PIE’s YTD gain of 13.5% speaks to the rebound. The majority of the fund’s holdings (as of December 3) focus on large-cap growth with top holdings in high-level Chinese companies like Tencent Holdings and Anta Sports.
Risks Remain, But the Future is Bright for Markets Overseas
The capital markets are currently riding the optimism of a vaccine, which is spilling over into the EM space.
“For all the risks of a year-end cooling-off period, emerging-market backers can’t complain about the lie of the land right now,” a Bloomberg article said. “From the rollout of vaccination programs in some countries to rising commodity prices and the prospect of a breakthrough in U.S. stimulus talks, there are plenty of tailwinds to justify the buying spree that has sent gauges of developing-nation stocks, currencies and bonds to five straight weeks of gains. Inflows into emerging markets reached a monthly record in November according to the Institute of International Finance and exchange-traded funds last week received the most money since January.”
“Low interest rates, increased conversation about stimulus and a ‘flight-to-quality’ unwind with progress on the Covid vaccine should keep the U.S. dollar dropping, which should be a boost to equities,” said Malcolm Dorson, a New York-based money manager at Mirae Asset Global Investments.
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