Editor's Note: This content was originally published on
by The ETF Professor, Benzinga Staff Writer.
Broadly speaking, emerging markets
, diversified funds and select country-specific plays, have been
duds this year.
That point was hammered home last month when major diversified
emerging markets ETFs such as the
Vanguard FTSE Emerging Markets ETF
(NYSEARCA:VWO) and the
iShares MSCI Emerging Markets Index Fund
(NYSEARCA:EEM) bled assets and tumbled lower. In the past month,
EEM has lost five percent.
At the regional level, Latin America, excluding Mexico, is proving
to be an egregious offender. Including Tuesday's drop, the
iShares S&P Latin America 40 Index Fund
(NYSEARCA:ILF) is down 7.7 percent in the past month and resides
just 5.6 percent above its 52-week low. The
SPDR S&P Emerging Latin America ETF
(NYSEARCA:GML) has not been a peach, either. If support at $67
fails out, that ETF is likely heading back its lows as well.
Things are particularly bad at the individual country level as the
following major ETFs highlight.
iShares MSCI Brazil Capped Index Fund
The iShares MSCI Brazil Capped Index Fund gets picked on a lot in
this space, but the bearishness on this ETF is not without merit.
Latin America's largest economy is dealing with a confluence of
factors, none of which are positive. There is the global
commodities slowdown and escalating concerns about Brazil's
to host the 2014 World Cup
Last week, in a stark departure from what is being seen elsewhere
in the developing world, Brazil raised interest rates
in a bid to fight inflation
. Here is the ominous equation faced by Brazil at the moment:
Rising rates + high inflation + slightly rising unemployment =
EWZ is flirting with $50 again, an area where it has previously
found support, but a high-volume violation of that level could
easily take another 10 percent off this ETF.
iShares MSCI All Peru Capped Index Fund
Sometimes it is not fun being right, but we did
forecast EPU's demise in February
, well before gold truly rolled over. The situation here is easy to
explain. Peru is South Amercia's fastest growing economy, but
growth is slowing. That is not even the worst problem.)
More concerning is that Peru is the world's largest silver producer
and a major copper and gold producer, too. That toxic cocktail has
helped EPU lose almost 19 percent in the past 90 days. Since the
start of the second quarter, EPU has lost almost $84 million in
assets. A new 52-week low? It happened early in Tuesday's session.
When EPU closes below $35, which could happen this week, it will be
the first time since October 2011.
iShares MSCI Chile Capped Investable Market Index
If falling silver prices hurt Peru and EPU, then falling copper
prices will definitely catch up to Chile and ECH. While the
materials sector is not as
prominent in this ETF
as some think, sometimes perception becomes reality.)
Actually, the reality is Chile is the world's largest copper, but
materials names only represent 12.5 percent of ECH's weight. Still,
plenty of traders treat ECH as an equity-based copper proxy and
that explains the 14.3 percent three-month decline. Like EPU, ECH
hit a new 52-week low earlier Tuesday.
Not to Be Outdone
In the essence of brevity, we will save the gory details for
another time, but the following Latin American ETFs not addressed
at length in this piece are not screaming buys at the moment: The
Global X FTSE Colombia 20 ETF
Market Vectors Brazil Small-Cap
(NYSEARCA:BRF) and the
iShares MSCI Brazil Small Cap Index Fund
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