Given China’s current economic struggles, it is not necessarily the prime option for emerging markets funds exposure. As such, traders may want to take a closer look at other regions that are exhibiting strength.
The country’s economy has been languishing, especially its real estate sector, which has suffered from lingering property development issues the past few years. It remains to be seen whether its government’s stimulus measures can be a net positive to revitalize the world’s second largest economy.
In the meantime, traders are looking elsewhere.
“Traders in the $325 billion industry for emerging-market exchange-traded funds are shifting cash toward strategies that focus on brighter spots in the developing world as China’s economy stumbles,” a Bloomberg report noted.
One aspect worth noting is the interest from actively managed exchange traded funds (ETFs) in EM opportunities. In particular, funds that focus on India and Latin America have been drawing inflows from investors.
“Actively managed ETFs — especially those with exposure to India’s world-beating growth and Latin American stocks — have lured nearly half a billion dollars over the past month, according to data compiled by Bloomberg on US-based funds. At the same time, investors have yanked $3.5 billion out of passive, China-heavy strategies,” the report added.
2 Emerging Markets Opportunities Outside China
Traders looking to steer clear of China have a plethora of options with emerging markets. One strength of EM is that various countries could be in different economic cycle stages as opposed to opportunities domestically.
Additionally, the performance of the local currency can influence emerging market countries. A weaker dollar can open up opportunities to capitalize on EM strength. The Bloomberg article suggested two regions worth looking at are India and Latin America.
Short-term traders looking to capitalize on their bullish vibes on India can consider the Direxion Daily MSCI India Bull 2x ETF (INDL), which seeks daily investment results equal to 200% of the performance of the MSCI India Index. That index measures the performance of the large- and mid-capitalization segments of India’s equity market. Those categories cover approximately 85% of companies in the country’s equity universe.
For opportunities in Latin America, traders can consider the Direxion Daily Latin America Bull 2X ETF (LBJ). The fund seeks daily investment results equal to 200% of the daily performance of the S&P Latin America 40 Index, which is a float-adjusted market-capitalization-weighted equity index of issuers drawn from five major markets: Brazil, Chile, Colombia, Mexico, and Peru.
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