Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

10 Emerging Markets ETFs for 2013


This is not a bold prediction, but it is reasonable to expect one of 2012's hottest asset classes to stand tall again in 2013.

WisdomTree India Earnings ETF (NYSEARCA:EPI): As has been noted, 2012 was a wild year for Indian equities and the ETFs that track them. EPI finished the year with a 18.5% gain, which is arguably somewhat deceiving given a nasty decline that saw the fund slide from around $21.60 in late February to $15.60 in early June.

There are reasons to be cautiously optimistic regarding what 2013 has in store for EPI and other India ETFs. The government has taken steps to bolster the economy, including reducing diesel subsidies and opening India's retail sector to more foreign investment. Inflation, perhaps the biggest stumbling block for the Indian economy over the past several years, is moderating a bit and that could give the Reserve Bank of India room to cut interest rates later this month.

An interest rate cut should be supportive of India large-cap ETFs because these funds are typically heavy on bank stocks and cyclical sectors. EPI, for example, allocates a combined 39% of its weight to financial services and materials names.

Still, Indian policymakers are carrying heavy burdens going into 2013. Inflation must be reduced, the country must keep hold of its investment-grade credit rating and domestic infrastructure must finally be improved.

iShares MSCI All Peru Capped Index Fund (NYSEARCA:EPU) There are multiple ways of interpreting some of Peru's latest economic data points. The Andean nation showed economic growth of 6.71% in October 2012 compared with October 2011, but that is down 1.2% from September 2012. Still, there is no debating the fact that this is South America's fastest-growing economy with expected 2013 GDP growth of 7%.

Given that Peru is one of the world's largest producers of copper, gold, and silver, EPU is often viewed as a materials play. It is that with a weight of 51.5% to that sector, but there is more to the story. Financials account for almost 27% of EPU's and that is a good thing because Peruvian banks are flourishing. Bank lending in Peru could rise by as much as 18% this year.

Impressively, Peruvian banks increased lending in 2012 with nary a bump regarding non-peforming loans. As one example, Credicorp (NYSE:BAP), EPU's largest holding with a weight of almost 21%, had a non-performing loan ratio of just 2.34% at the end of the second quarter of 2012. Generally, an acceptable NPL ratio is in the area of 5%. At the end of November, the NPL ratio among private Peruvian banks was a stellar 1.79%.

On a related note, Peru's central bank lifted reserve requirements four times last year in an effort to keep inflation tame. The outlook for 2013 is generally positive, but EPU returned almost 24% last year, leaving investors to wonder if a sequel is possible. More upside is possible though Peru will need at least two of the following three factors to work in its favor: continued improvement in the Chinese economy, the same thing in the US, and any type of positive economic momentum out of the eurozone.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos