The S&P 500 slid almost 2.4 percent on Wednesday, a day
after President Obama won a second term in office. All 10 S&P
500 sectors slid on the day as the index cascaded to its worst
one-day performance since June.
Post-election jitters were not confined to U.S. equities as
tracking developed and markets sank on the day. The Vanguard MSCI
Europe ETF (NYSE:
) gave up 1.7 percent while the iShares MSCI Canada Index Fund
slid 1.4 percent on above average volume.
Looking at emerging markets ETFs, the iShares MSCI Emerging
Markets Index Fund (NYSE:
) lost 1.6 percent on volume that was more than 50 percent above
the daily average. EEM, the second-largest emerging markets ETF,
was just one member of the sea of red that was developing market
ETFs on Wednesday.
There might be a two-fold silver lining for investors looking
to grab emerging markets exposure. First, not all ETFs that track
are intimately correlated to U.S. stocks
. Second, Wednesday's sell-off could represent a buying
opportunity to get involved with select emerging markets ETFs.
The following funds look particularly appealing:
iShares MSCI China Index Fund (NYSE:
Lost in all the fanfare of U.S. elections is that Xi Jinping
officially becomes China's new president on Thursday. What impact
a new Chinese leader has on China ETFs remains to be seen, but it
can be said the slump in MCHI and other China funds on Wednesday
MCHI lost 2.1 percent, but this could be the buying
opportunity late-comers have been looking for. Not only are there
ample reasons why
MCHI is superior to the iShares FTSE China 25
Index Fund (NYSE:
), it should be viewed as good news for these ETFs that President
Obama won reelection.
The reasoning is simple. Republican challenger spewed the
harsher anti-China rhetoric of the two candidates during the
campaign and some investors viewed the now vanquished Romney as
more likely than Obama to something about China's alleged
iShares MSCI All Peru Capped Index Fund (NYSE:
Alright, so the iShares MSCI All Peru Capped Index Fund did not
fall all that much on Wednesday. A drop of less than 0.6 percent
on light volume is not to say the bears controlled this fund.
However, there are some interesting things to note about EPU.
First, the ETF easily outperformed EEM and the iShares MSCI
Brazil Index Fund (NYSE:
) on Wednesday. Second, in the process of doing so, EPU actually
closed fairly close to its intraday high while many emerging
markets ETFs settled closer to their lows of the day. Finally,
gold ETFs inched higher amid the Wednesday equity sell-off and
silver ETFs were only modest losers. Peru is a major producer of
both precious metals, implying that if gold's safe-haven status
is reborn, EPU could catch a bid through the end of the year.
iShares MSCI Chile Investable Market Index Fund (NYSE:
Like EPU, the iShares MSCI Chile Investable Market Index Fund
tracks a South American nation viewed primarily as a materials
play by foreign investors. In Chile's case, the metal it is most
known for is copper, perhaps the epitome of a risk on trade. To
its credit, ECH's Wednesday decline was inline with EPU's at
about 0.6 percent.
Given China's 800-pound gorilla status in the copper market, a
rebounding Chinese economy would be good news for the Chilean
economy. That said, Chile's expected GDP growth rate of 4.3
percent this year
is superior to the Latin America regional average
of 3.7 percent growth
ETFs such as FXI and MCHI could be the tail that wags ECH's
dog, but is also worth noting that the Chile ETF has very little
correlation to U.S. equities. Over the past three years, ECH's
correlation to the SPDR S&P 500 (NYSE:
) is just 0.34,
according to State Street data
For more on emerging markets ETFs, click
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