The Federal Reserve's no tapering announcement was big news
for the emerging markets complex.
Still, all the damage incurred by emerging markets ETFs, due
in large part to speculation of tapering, could not be undone in
a single trading day and many marquee emerging markets funds are
still sporting year-to-date losses.
Emerging Markets Consumer ETFs Come Roaring
With tapering out of the conversation, at least for now, the
emerging markets rally that started a few weeks ago has the green
light to continue. Identifying the ETFs that stand to benefit the
most in a no tapering world is critical. Fortunately, it is not
that difficult. Start with the following ETFs.
iShares MSCI South Korea Capped ETF (NYSE:
) The iShares MSCI South Korea Capped ETF makes for an obvious
no-tapering winner and not just because the fund was up 10
percent before Wednesday. With Wednesday's Fed-induced gains, EWY
is now higher by 4.5 percent over the past month.
EWY, the largest South Korea ETF, could keep building on those
gains because prior to the no tapering announcement, policymakers
and central bankers there acknowledged loss of U.S. stimulus
was one of the two biggest risks
facing Asia's fourth-largest economy.
The other is the weak yen, but in the case of South Korean
stocks, losing one of the two major headwinds is better than not
losing either. Bolstering the case for EWY despite the recent
run-up is that
South Korean stocks remain cheap relative to some
other, more volatile emerging markets
. EWY is just two percent below its 52-week high and if the ETF
can make a new high, it will turn positive on a year-to-date
PowerShares DWA Emerging Markets Technical Leaders Portfolio
) In the first quarter, nearly every pundit that was given
airtime or that had access to a keyboard had something negative
to say about emerging markets. The deep flaw in that argument at
the time was that they were emphasizing the struggles of the BRIC
nations while ignoring robust equity market performances in
places like Indonesia, Thailand and Turkey. By doing that, they
impressive out-performance of rival diversified
emerging markets ETFs
However, PIE could not skirt the tapering carnage wrought on
emerging markets. In mid-June, 47 percent of the fund's weight
was allocated to
Indonesia, Thailand, the Philippines and
, markets that were slammed by tapering volatility.
Indonesia is still PIE's second-largest country weight at 11.2
percent and while no tapering will not immediately fix the
country's current account deficit, PIE is positioned to take
advantage of the Fed's gifts. South Korea is the ETF's largest
country weight at 13.3 percent and a 9.3 percent weight to South
Africa could prove useful, particularly if there is
follow-through on the long precious metals trade now that
investors do not need to worry about imminent tapering.
iShares MSCI Turkey ETF (NYSE:
) Right after tapering entered the equation in late May, Turkish
equities were .
Tapering speculation started just weeks after the Borsa
Istanbul National 100 surged to its highest levels in at least 25
years and soon after Moody's Investors Service gave Turkey an
investment-grade credit rating. From May 24 through August 26,
TUR plunged almost 32 percent. Logically speaking, TUR should
benefit with tapering gone. In fact, the ETF is already up almost
11 percent in the past month.
Additionally, Turkish equities are cheap. The MSCI Turkey
Index has a P/E ratio of 9.1 compared to its 10-year average
10.9. The MSCI Emerging Markets Index currently trades with a P/E
For more on ETFs, click .
Disclosure: Author is long PIE.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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