Those not living in a cave know that 2011 has been a brutal year for emerging markets equities and the associated ETFs. Europe's sovereign debt disaster is one culprit to be sure, but the problems don't end there.
Inflation has been the four-letter troubling markets from Sao Paolo to Shanghai. India might be the worst emerging markets inflation offender and political strife has hampered Russia ETFs as of late. That covers the BRIC doldrums, but other Asian and Latin American markets haven't exactly been roses either.
Now with just a few trading days left in 2011, it's seems all but certain that the Vanguard MSCI Emerging Markets ETF (NYSE: VWO) and the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) will finish the year in the red.
Perhaps 2012 will bring better things to emerging markets investors. With that, let's have a look at 12 EM ETFs for 2012. In no particular order.
iShares MSCI Brazil Index Fund (NYSE: EWZ):The iShares MSCI Brazil Index Fund is one of the poster boys for an ETF that has been hampered by inflation in the market it tracks. Now, Brazil's central bank wants to start lowering interest rates to assuage global investors Latin America's largest economy is still a prime destination for capital. Yes, there is still an inflation story to be told with Brazil, but EWZ's fortunes, as always, are tied to Petrobras (NYSE: PBR) and Vale (NYSE: VALE). Those two stocks account for almost two-thirds of the ETF's weight.
iShares FTSE China 25 Index Fund (NYSE: FXI):As Benzinga recently noted, FXI would basically be trading with a bullseye on its back in the even of a Chinese banking crisis. FXI is a good ETF for avoiding speculative Chinese names, but a terrible ETF for avoiding financials and state-controlled enterprises. There are too many moving parts here to be overtly bullish on FXI's 2012 fortunes at this time.
Market Vectors Russia ETF (NYSE: RSX):There are three Russia-specific ETFs tracking large-caps, but we'll stick with the oldest and largest! . All th ings being equal, RSX should rally as triple-digit oil prices become the norm. All things are not equal and with Vladimir Putin once again becoming Russia's president, RSX could be done in by political headwinds no matter what oil prices are doing.
Global X FTSE Colombia 20 ETF (NYSE: GXG):Colombia is still underrated when it comes to Latin American investment themes and it would be reasonable to say GXG has been unfairly battered in 2011. Inflation is well-contained in Colombia and the country is one of just five in the world with rising oil output. Essential to the ETF's near-term fortunes is its ability to stay above $16.50.
IndexIQ South Korea Small-Cap ETF (NYSE: SKOR):We've previously been fans of this ETF, arguing it's a better way to play a rebound in South Korean stocks than the larger iShares MSCI South Korea Index Fund (NYSE: EWY). If EM small-caps come back into style next year, investors will in fact score with SKOR.
WisdomTree India Earnings ETF (NYSE: EPI):The WisdomTree India Earnings ETF was trading for over $25 in April and May, so when it fell to $22, it may have looked like good value. The same could have been said at $20, $19, $18, well you get the picture. Today, EPI is threatening to break $16 and like every other India ETF, catching EPI here would be akin to catching a falling knife.
iShares MSCI Chile Investable Market Index Fund (NYSE: ECH):It's probably fair to say the iShares MSCI Chile Investable Market Index Fund has put in a bottom, but even though materials aren't the largest sector weight in this fund, copper prices dictate ECH's price action and that means this ETF is very much a China play, whether we want it to be or not.
Market Vectors Indonesia ETF (NYSE: IDX):A year ago, Indonesia was getting a bad wrap for not raising interest rates, but the country's central bank deserves credit for not following China's lead and using ineffective blunt instruments to stem inflation. At the moment, a neutral to slightly bearish posture on Indonesia is! probabl y warranted, but if EM ETFs rebound, this is one fund that will wear a crown, not play court jester.
Global X FTSE ASEAN 40 ETF (NYSE: ASEA):The Global X FTSE ASEAN 40 ETF made its debut earlier this year and is off to a decent start in terms of assets under management and daily turnover. And to its credit, ASEA is basically flat on the year. The combination of Singapore, Malaysia, Indonesia and Thailand in one ETF is alluring. One of 2011's better new ETF ideas could be one of 2012's better EM performers in the right environment.
iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE):The iShares MSCI Philippines Investable Market Index Fund is kind of underrated in our opinion. Consider this: The growth prospects in the Philippines are every bit as attractive as other Asian tigers, but the country has a good grasp on inflation. Plus EPHE is somewhat conservative with 27% combined exposure to utilities and telecoms.
Market Vectors Vietnam ETF (NYSE: VNM):If you want to see a really ugly chart of an EM ETF, take a look at the Market Vectors Vietnam ETF. VNM makes this list not because we think it's going to go up. No sir. It makes the list because it's always an adrenaline rush to trade around Vietnam's various currency devaluations. It'd be a shock to see all of 2012 go by without at least one.
iShares MSCI Turkey Investable Index Fund (NYSE: TUR):Remember when the iShares MSCI Turkey Investable Market Index Fund was flirting with $70? Yeah, we don't either. This one is victim of a double-whammy. It's an emerging markets ETF, that's bad enough, but Turkey depends on trade with the Euro Zone. That's the second dose of bad news. More bad news: Turkey's central bank governor warned Monday that inflation was now his No.1 problem, Barron's reported.
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