Broadly speaking, 2012 has been a good year for emerging
. Diversified funds such as the iShares MSCI Emerging Markets
Index Fund (NYSE:
), the iShares MSCI Emerging Markets Minimum Volatility Index
) and the WisdomTree Emerging Markets Equity Income Fund (NYSE:
) have delivered solid returns.
At the country level, ETFs tracking developing nations ranging
from Colombia to Mexico to the Philippines to Thailand
and scores of others have impressed as well.
That all sounds good, but it does not mean all emerging
markets ETFs have delivered for investors in 2012. Some have been
downright disappointments, including
marquee emerging markets ETFs
such as the iShares MSCI Brazil Index Fund (NYSE:
To be sure, disappointment comes in a variety of forms and EWZ
has been not the only emerging markets ETF turkey this year. Some
of the following funds have been just equally, if not more,
Market Vectors Vietnam ETF (NYSE:
Looking at VNM's year-to-date gain of 16.7 percent could make the
ETF's inclusion on this list confusing to the untrained eye.
However, a quick glance at VNM's chart shows the bulk of the
ETF's gains were accrued in the first quarter and after the fund
failed to run much past $21 in May, the ensuing tumble was
Coming off a 2011 when Vietnamese stocks were hammered by
rampant inflation and currency devaluations, it looked like VNM
finally had its act together early this year. That theory would
be dispelled. In the third quarter came news of the arrest of two
noteworthy Vietnamese banking scions, headlines that dealt a blow
to investor confidence in
Investors were harshly reminded this is a corrupt country and
headlines about a banking sector awash in bad loans did not help.
In other words, Vietnam squandered a great opportunity for itself
and VNM this year.
The good news is
VNM has shown signs of life in recent weeks
. The fund, which tracks a market that is cheap relative to the
broader emerging markets universe, has surged 7.7 percent in the
past month. Remember, it was in the late fourth quarter of 2011
that VNM started perking up before surging in the early part of
the new year. Perhaps a sequel is in store.
Market Vectors Indonesia ETF (NYSE:
As early as early February, ETFs tracking Indonesia were showing
laggard signs and that is exactly what they have been this year.
In the case of IDX, the ETF is up almost 2.5 percent
year-to-date, but that is nowhere the returns offered by ETFs
tracking Malaysia, the Philippines, Thailand and the
There are some cautionary tales regarding the Indonesian
economy, Southeast Asia's largest. Like many emerging markets,
Indonesia is home to decrepit infrastructure. For now at least,
Indonesia is on the India infrastructure plan, which is short on
action. Second, there are some signs of a property bubble. The
last time Indonesian real estate reached bubble heights was in
1998 right before the Asian financial crisis.
Still, a bull case remains for Indonesia and IDX. The economy
is expected to grow 6.4 percent per year from 2013 through 2017,
the highest growth rate of the ASEAN nations,
according to the Jakarta Post
Additionally, the Indonesian economy has done something that
would make even China green with envy: Increase domestic
consumption. Domestic consumption
accounts for nearly two-thirds of Indonesian
PowerShares Golden Dragon China Portfolio (NYSE:
The PowerShares Golden Dragon China Portfolio is a disappointment
relative to its peer group as the ETF is down almost 5.3 percent
this year. That loss is bad on its own, but it looks worse when
measured against an almost 13 percent gain for the iShares FTSE
China 25 Index Fund (NYSE:
), an almost 18 percent jump for the iShares MSCI China Index
) and a 16.2 percent gain for the SPDR S&P China ETF (NYSE:
What has bitten PGJ is its exposure to small-cap growth names
(an allocation of 10.6 percent)
and its exposure to Chinese Internet names
. For example, Baidu (NASDAQ:
), Sina (NASDAQ:
) and NetEase (NASDAQ:
) are down an average of 12 percent this year and those three
names combine for almost 18 percent of China's weight.
There is hope for PGJ. The Chinese economy is rebounding in
earnest and there is something to be said for controversial
stocks, of which Chinese Internet names fit the bill. When the
darkest clouds have passed, controversial stocks can rally in
significant fashion. That means there could be upside in store
for PGJ in 2013.
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