Another round of troubling U.S. economic data and another
grizzly flash reading on China's Purchasing Managers Index
combined to sink global stocks today. Those data points serve as
stark reminders that growth is slowing all over the world, even
in alluring emerging markets.
Certainly, there are
opportunities to be had in developing nations for
patient investors
. However, being patient right now could easily mean waiting on
the sidelines for better pricing with traditional long emerging
markets ETFs, while profiting on the downside with inverse
funds.
The silver lining for emerging markets investors is that the
most vulnerable countries and corresponding ETFs have become
increasingly easy to spot. Fortunately, so are the bearish
equivalents. Just look for the few ETFs that finished in the
green today.
Direxion Daily Russia Bear 3X Shares (NYSE:
RUSS
)
Yes, Russian equities and the ETFs that track those stocks
are home to compelling valuations
. However, the valuations just keep falling as oil prices trade
lower.
The Russian stock market has fallen 32 percent since last
July, double the drop in Brent crude,
according to EmergingMoney.com
.
EmergingMoney does highlight a potential long-term bull case
for state-run Russian energy giant Gazprom that includes
development of the Shtokman field. The thesis is valid and one
for investors interested in ETFs such as the Market Vectors
Russia ETF (NYSE:
RSX
), where Gazprom is the top holding, to stay abreast of. Still,
investors with a long-term view of Russia should consider hedging
those bets with short-term trades in the highly volatile Direxion
Daily Russia Bear 3X Shares. RUSS has surged almost 80 percent in
the past three months while RSX has lost 22.2 percent.
Direxion Daily India Bear 3X Shares (NYSE:
INDZ
)
It is only slight hyperbole to say
no one is bullish on Indian equities and ETFs
right now
. With rising deficits, slowing growth and the real possibility
of losing its investment-grade status, Asia's third-largest
economy is not giving investors many reasons to cheer.
The surprise regarding the Direxion Daily India Bear 3X Shares
is not that the ETF has jumped almost 40 percent in the past
three months. It is that the fund still remains thinly traded
with average daily volume of less than 15,000 shares per day.
ProShares UltraShort MSCI Brazil (NYSE:
BZQ
)
The case for the ProShares UltraShort MSCI Brazil can be
validated on multiple fronts. First, there are the aforementioned
falling oil prices. Slumping oil prices equal one more reason for
short sellers to punish Petrobras (NYSE:
PBR
), which is a major holding in the iShares MSCI Brazil Index Fund
(NYSE:
EWZ
).
Then, there is Brazil's inflation problem, slowing growth, a
faltering real and a political environment that is barely better
than
Argentina's when it comes to embracing foreign
companies
. China's economic woes loom large for Brazil as well because the
world's second-largest economy is Brazil's biggest trading
partner.
Ultimately there are more good reasons to own BZQ than EWZ in
the current market environment.
For more on emerging markets ETFs, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.