Western investors are gradually starting to become aware of the
strength of the Philippines economy.
Those that follow ETFs by now know the iShares MSCI Philippines
Index Fund (NYSE:
) has been
a stalwart among emerging markets ETFs
EPHE's mettle has been tested recently as the Philippines is
coping with severe flooding. The floods have caused 85 deaths and
highlight one of the risks of investing in emerging markets. Due to
poor infrastructure, many developing nations are ill-equipped to
deal with natural disasters. The problem is many developing nations
are found in corners of the globe where natural disasters have a
tendency to strike with some frequency.
Not surprisingly, EPHE has been punished a little bit. Despite
trading modestly higher today, the ETF is down about 1.1 percent in
the past week. How the floods will impact
the already robust Philippine economy
remains to be seen, but the experience of other emerging markets
ETFs following natural disasters can be instructive for those
looking to buy EPHE on a dip. Consider the following:
Market Vectors Indonesia ETF (NYSE:
) Indonesia, Southeast Asia's largest economy, is a risky place
when it comes to "acts of a high power" events. Not only is the
country vulnerable to earthquakes, but those earthquakes can
trigger tsunamis. In September 2009, an earthquake killed nearly 60
people in Indonesia.
Granted, this was after the S&P 500 had put in its March
2009 bottom, but the Market Vectors Indonesia ETF responded well
after the earthquake. IDX, which debuted in January 2009, was
trading at $17 on September 4, 2009. By the end of the year, the
ETF was flirting with $21.
iShares MSCI Chile Investable Market Index Fund (NYSE:
) Chile is incredibly vulnerable to earthquakes. On January 2,
2011, a 7.1 earthquake struck the world's copper-producing country.
That was followed up by a 6.8 quake in February and a 6.2
earthquake in March.
ECH did tumble mightily following the January 2011 quake and did
not find a bottom until a couple of weeks after the March 2011
upheaval. The bounce from there was impressive, about 20 percent in
a month, but the fund would struggle along with the rest of the
emerging markets complex for the bulk of 2011.
iShares MSCI Turkey Investable Market Index Fund (NYSE: ) A
deadly 7.2 earthquake ravaged Turkey in late October 2011. By some
estimates, the death toll came to 1,000. Somewhat surprisingly, the
iShares MSCI Turkey Investable Market Index Fund jumped in the days
after the disaster, but by late November the ETF had plunged almost
In fact, investors kept punishing TUR until January 2012.
Admittedly, it would have been difficult to have held TUR from
November 2011 through today, but that would have been a winning
trade. Hindsight aside, there is a lot to like about the . The
cautionary tale is that this ETF did not act well following a major
iShares MSCI Thailand Investable Market Index Fund (NYSE: ) Even
those Americans that do not invest in Thailand probably remember
the severe flooding that hit the country in late 2011. Those floods
crippled hard-drive suppliers operating there, sending shock waves
throughout the technology sector.
The iShares MSCI Thailand Investable Market Index Fund was
volatile following the floods and by the end of November, the ETF
had lost about six percent from its October percent. As was the
case with IDX in 2009, a little bit of patience went a long way
with THD. The fund had regained its October peak by early December
and has added almost 18 percent year-to-date.
For more on emerging markets ETFs, click .
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