Confidence in Emerging Markets Returning as Coronavirus Cases Dwindle

Wednesday’s market session saw another rise in emerging markets (EM) assets as the number of new coronavirus cases starts to dwindle. Per a Reuters report, China reported its lowest number of new cases of the coronavirus since late January.

The virus, responsible for over 1,100 health-related deaths, could come to an end by April, according to a senior medical advisor.

“Unless there’s a real shocker to the downside, like if we get catastrophic data from China, markets are just going to keep on going higher because there’s a lot of cash in the system,” said Stephen Innes, chief market strategist at AxiCorp.

The report noted that EM stocks were “up 0.6%, with Chinese equities ending higher for the seventh day in a row. Shanghai’s main index has now recovered most of its losses from Feb. 3, when it slumped nearly 8% on reopening after the extended Lunar New Year holidays.”

For emerging markets exposure, one fund to check out is 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. The fund generally invests at least 90% of its assets in the securities of its underlying index and in depositary receipts representing securities in its underlying index. The index is designed to measure equity market performance in the global emerging markets. The underlying index will include large- and mid-capitalization companies and may change over time.

Relative Value EM Play

For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.

RWED seeks investment results that track the MSCI Emerging Markets IMI – EAFE IMI 150/50 Return Spread Index. The Index measures the performance of a portfolio that has 150 percent long exposure to the MSCI Emerging Markets IMI Index and 50 percent short exposure to the MSCI EAFE IMI Index.

For more relative market trends, visit our Relative Value Channel.