After a tidal wave of sell-offs in March when the coronavirus pandemic hit a zenith, investors are now looking to dip their toes back into a pool of risk assets, such as emerging markets (EM).
Per a Wall Street Journal report, EM countries “including India, China, Brazil, and Russia saw nonresident investors buy a total of $4.1 billion of their stocks and bonds in May, according to data from the Institute of International Finance. But those investors have also been careful to differentiate between regions where the coronavirus has spread more quickly and those that take different attitudes to the pandemic.”
“Some of them are throwing in the towel and lifting lockdown measures, presumably saying the economic costs are too much,” said Edward Glossop, Emerging Markets Economist at Capital Economics.
According to the report, May was the month when Chinese equities received the most attention from investors with $4.8 billion allocated while $4.1 billion came out of other EM countries.
“Up until six or eight months ago, it didn’t matter if you put your money in this emerging market or that emerging market. But now because of the cascading effects of Covid-19, you have regional differences of how this pandemic is developing and how policymakers are responding,” said Jonathan Fortun, an economist at the IIF.
EM Equities Exposure via ETFs
Investors looking to get into EM can use the Goldman Sachs MarketBeta Emerging Markets Equity ETF (GSEE). GSEE seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive GBS Emerging Markets Large & Mid Cap Index.
The fund invests at least 80% of its assets in securities included in its underlying index, in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index, which consists of equity securities of large and mid-capitalization issuers covering approximately the largest 85% of the free-float market capitalization in emerging markets.
Investors who want broad exposure to EM can look at funds like the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO). VWO employs an indexing investment approach designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. It invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the index in terms of key characteristics.
Another fund to consider is the iShares MSCI Emerging Markets ETF (NYSEArca: EEM). EEM seeks to track the investment results of the MSCI Emerging Markets Index. , which is designed to measure equity market performance in the global emerging markets.
For more market trends, visit ETF Trends.