Lack of Tourism is a Punch to the Gut for Emerging Markets

Covid-19 itself is wreaking havoc on emerging markets (EM) economies trying to fight the pandemic itself, but a lot of EM countries are taking a revenue punch to the gut with a lack of tourism.

“That is bad news for jet-setters but potentially disastrous for a handful of emerging-market economies,” a Wall Street Journal article noted. “Tourism is an export sector and a major source of foreign income for some, which can act as a buffer against financial shocks. Among those most at risk, Turkey—already in bad shape before the pandemic—looks particularly vulnerable.”

“In a report published last week, International Monetary Fund economists used estimates from the UN World Tourism Organization to gauge how depressed revenues will be this year. Thailand is the worst-affected country in the sample, with a net impact of around minus-6.1 percentage points for the tourism powerhouse’s current-account balance,” the report added.

Nonetheless, EM could still present investors with a value-added option. For EM countries that can rebound swiftly, this could present investors with an opportunity to diversify their portfolios on the cheap with assets focused overseas.

As global economies continue to reopen, the EM space is still a good opportunity to capture diversification and growth as a value-tilted option, but the right strategy that highlights due diligence is a must—enter the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM).

GEM seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Goldman Sachs ActiveBeta® Emerging Markets Equity Index. The fund invests at least 80% of its assets (exclusive of collateral held from securities lending) 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.

GEM Chart

GEM data by YCharts

The index is designed to deliver exposure to equity securities of emerging market issuers. In order to obtain the highest quality equity exposure, GEM aims to acquire stocks based on four well-established attributes of performance: good value, strong momentum, high quality, and low volatility.

In a capital market environment where value is often pitted against growth in a battle of factors, GEM uses both in addition to other factors that can filter out the best equities that can capture upside, but at the same time, mute the effects of a downturn. Rest assured, GEM gives investors the diversification they seek with emerging markets, but only the best that EM equities have to offer using their strategy.

Additionally, for more market trends, visit ETF Trends.