In an environment of slumping emerging markets equities,
plunging currencies and vulnerable sovereign credit ratings, the
current account surplus has become one of the most prized
economic traits a country can possess.
The combination of tumbling currencies and widening current
account deficits explain the deep slumps recently experienced by
ETFs tracking emerging markets such as India and Indonesia. Those
widening deficits also explain why global investors are pulling
cash from those countries and why both are vulnerable to
sovereign ratings downgrades
Fortunately for investors, there are a few countries in both
the developed and emerging worlds that sport current account
surpluses and these nations are easily accessible via ETFs.
Consider the following funds.
iShares MSCI Philippines ETF (NYSE:
) When it comes to Southeast Asia ETFs these days, it is hard to
see the forest through the trees. Given the substantial long-term
potential offered by Philippine equities, EPHE
undoubtedly the forest
while the trees dragging this ETF down are the likes of
Indonesia, Malaysia and Thailand.
The simple fact is that on top of all of the
compelling fundamental reasons
to invest in the Philippines is that the country has a current
account surplus. The Philippines is often compared to Indonesia,
a country with a WIDENING deficit.
EPHE has been slammed on fears the Federal Reserve will taper
its quantitative easing program, which has led to a weaker peso.
That situation is overstated and/or misunderstood because the
Philippines is on the receiving end of billions in
dollar-denominated foreign remittances and the country does not
need to service a massive amount of dollar-denominated debt.
Revisiting The Philippines ETF
Market Vectors Poland ETF Or the iShares MSCI Poland Capped
). Either way, investors gain exposure to Poland, a country that
has proven to be one of the most durable emerging markets. While
EPOL and PLND
are not entirely immune
to Fed tapering, the two ETFs have gained about 2.7 percent in
the past month.
Poland's most recently posted current surplus was something of
a surprise, but a positive one at that. What should not be a
surprise is the catalyst that can buoy further gains for EPOL and
PLND. That being an ongoing economic recovery in the eurozone.
Simple geography dictates that investors looking for emerging
markets plays on the eurozone recovery should consider EPOL and
Market Vectors Vietnam ETF (NYSE:
) Vietnam, classified as a frontier market, has been hammered by
Fed tapering fears and slowing Chinese economic growth, factors
that have weighed on a plethora of emerging markets ETFs. Vietnam
also has its own problems to deal with, namely its plans to
eradicate bad debt and sour loans
from its fragile banking system.
Long story short, VNM has plunged nearly 20 percent in the
past 90 days. However, foreign remittances to the country are
rising, currency reserves are surging and it is estimated the
2013 account surplus could be $5 billion
VNM had a P/E of 11.87 and a price-to-book ratio of 1.29 at
the end of July,
according to Market Vectors data
. That makes Vietnamese equities cheaper than their Brazilian,
Indian and Indonesian counterparts, just to name a few.
For more on ETFs, click .
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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