It has been duly noted that the emerging markets universe is
littered with acronyms. BRIC, CIVETS and MIST and that just
identifies the popular ones. Given the popularity of these catchy
terms, particularly BRIC, it is hard for new emerging markets
acronyms to make inroads.
That did not keep a new one from popping up earlier in 2012.
That
acronym is CAPPT
, which stands for Chile, Argentina, Peru, Philippines and
Thailand.
In the essence of transparency, it should be noted that
Argentina is classified as a frontier market and the country
is in danger of being downgraded from there
.
Argentina as represented by the Global X FTSE Argentina 20
(NYSE:
ARGT
) has been the problem child in CAPPT this year. The ETF was
crushed earlier this year following the YPF (NYSE:
YPF
) nationalization, a move that signaled to
foreign investors the country was far from open
for business
.
ARGT is still thinly traded (less than 3,000 shares per day),
but the fund has chipped in a 5.6 percent gain among the major
CAPPT ETFs over the past 90 days. That puts the fund right in the
middle of the pack. The worst-performer of the CAPPT quintet over
the past three months is a surprise.
That dubious honor belongs to the iShares MSCI Chile
Investable Market Index Fund (NYSE:
ECH
). Why ECH has only gained 1.4 percent in the past three months
is up for debate. Some might say it is because the ETF is richly
valued compared to the broader emerging markets universe. ECH
currently trades at almost 23 times earnings and 2.7 times book
value,
according to iShares data
. In P/E terms, that makes ECH far pricier than the iShares MSCI
Emerging Markets Index Fund (NYSE:
EEM
).
Still, ECH has a beta of 1.9 against the S&P 500, implying
the ETF should be up much more since July. The bull case for
Chile remains in tact, that being the country
is open, transparent and friendly to foreign
investment
compared to Argentina and Brazil.
Perhaps it has been slack commodities demand that has stymied
ECH recently, but that theory does not explain why the iShares
MSCI All Peru Capped Index Fund (NYSE:
EPU
) is higher by nearly eight percent since July. As a major
producer of gold and silver among other metals, Peru is viewed as
a materials play. That thesis sent traders
running into EPU ahead of and following the
announcement of another round of quantitative easing from the
Federal Reserve
.
The danger with EPU could be that with enthusiasm for QE3 now
all but dead, the ETF could be vulnerable to retrenchment. The
good news is Peru's second-quarter GDP jumped 7.4 percent and
EPU is still a little cheaper than EEM
.
The iShares MSCI Philippines Investable Market Index Fund
(NYSE:
EPHE
) has been the second-worst CAPPT performer over the past 90
days, gaining "just" 5.5 percent. On the other hand, this is one
of the best country-specific ETFs of any kind on a year-to-date
basis with a gain in excess of 32 percent.
Based on some valuation metrics, EPHE is expensive relative to
some ETFs tracking BRIC countries. However, EPHE's forward P/E is
not that far north of the S&P 500's and it is worth noting
that the ETF has a beta of below one against the U.S. broader
market index.
The iShares MSCI Thailand Investable Market Index Fund (NYSE:
THD
) has jumped almost 10 percent in the past three months and is up
more than 25 percent year-to-date. Those are the type of
statistics that could lead some investors to feeling the ETF has
come too far too fast or that the easy money has already been
made.
In terms of political volatility, Thailand still is not
perfect, but of the CAPPT nations, it certainly ranks ahead of
Argentina. Given that Thailand's economy is not as materials
dependent as Peru's and far more advanced than that of the
Philippines, THD could be the second-most conservative of the
CAPPT ETFs after ECH.
Even with its recent gains, THD's forward P/E, price/free cash
flow ratio and earnings growth rates compare quite favorably
against the S&P 500.
For more on CAPPT,
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.