Goldman Sachs Launches New ETFs with 'MISTy' Focus
How's this for a combination mother nature never intended: Mexico, Indonesia, Korea, and Turkey.
Goldman Sachs (GS) is known for a lot of things. For those who actively follow emerging markets, the venerable and controversial Wall Street bank is known as the firm that brought us the BRIC acronym and the Next-11 group of rapidly growing emerging economies.
Well, the bank has another kitschy phrase for a quartet of emerging markets. This time it's MIST, or Mexico, Indonesia, South Korea, and Turkey. It's debatable as to whether South Korea should even be considered an emerging market any longer. In fact, the International Monetary Fund classifies South Korea as a developed economy.
Indonesia and Turkey both have a home in the CIVETS acronym, but MIST is the first memorable grouping to include Mexico, at least as far as we can remember.
Chances are the higher risk CAPPT acronym will show better returns for ETF investors over time, but MIST has its own bull case. Let's look at it through the following ETFs.
iShares MSCI Mexico Investable Market Index Fund (EWW) Year-to-date, the iShares MSCI Mexico Investable Market Index Fund has outperformed the S&P 500, but the ETF often takes its cues from US and then proceeds to gain more on the upside and lose more on the downside. The downside risk is highlighted in the statistics for the past year that show iShares MSCI Mexico Investable Market Index Fund down more than 4%, but the S&P 500 up more than 4%.
Investors with extremely long time horizons should note that in the past decade, the iShares MSCI Mexico Investable Market Index Fund has offered ten times the returns of the S&P 500. Mexico's GDP is forecast to grow at 3.5% this year and 3.8% next year, the government recently said. The Mexican government cited familiar risks to its growth targets: Europe's debt crisis and a slowing Chinese economy. Overall, the long-term outlook with Mexico is bright, particularly if the country can increase oil output, but there could be hiccups this year caused by global macroeconomic headwinds.
Market Vectors Indonesia ETF (IDX) The Market Vectors Indonesia Index ETF and its rival, the iShares MSCI Indonesia Investable Market Index Fund (EIDO), have been surprising laggards in terms of emerging Asia-Pacific ETFs this year as both are getting trounced by ETFs tracking the Philippines, Thailand, and other countries in the region.
That's odd considering Indonesia posted fourth-quarter 2011 and full-year GDP growth rates of 6.5%, growth levels the country hadn't seen since the Asian financial crisis of the 1990s. The World Bank sees Indonesian GDP growth at 6.5% this year, but the Asian Development Bank sees 6.4%, down from a prior forecast of 6.5%.
Still, this is Southeast Asia's largest economy and Indonesia has one thing in its favor: domestic consumption. This isn't the export-driven economy some think it is and that's not a bad thing given the problems in Europe and economic concerns in China. Also consider the newly minted Market Indonesia Small-Cap ETF (IDXJ).
IndexIQ South Korea Small Cap ETF (SKOR) If we're going to disagree with the IMF and call South Korea an emerging market, it's certainly a conservative emerging market. So maybe it's worth taking on some additional risk with the IndexIQ South Korea Small Cap ETF. South Korea does have an impressive 3.4% unemployment rate and a technology-driven economy, which IndexIQ South Korea Small Cap ETF embraces with 17.2% allocation to that sector.
IndexIQ South Korea Small Cap ETF has struggled this year compared to the large-cap focused iShares MSCI South Korea Index Fund (EWY) as investors have shunned South Korean small-caps. IndexIQ South Korea Small Cap ETF could be worth a trade if it finds support at $24. Put a stop at $22.
iShares MSCI Turkey Investable Market Index Fund (TUR) Turkey is the "T" in our DUPT acronym and there are plenty of reasons TUR is one of the top performers among emerging markets ETFs this year. There are also plenty of reasons this fund's run isn't over.
Favorable demographics, a strong currency, and a shrinking debt/GDP ratio, among other factors, bode well for the future of the Turkish economy and iShares MSCI Turkey Investable Market Index Fund's future returns.
Editor's Note: This content was originally published on Benzinga.com by The ETF Professor.
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