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4 EM ETFs that are Still in Green this Year

Zacks Equity Research

The global markets are shaky this year with hardly any risky asset delivering solid returns. Investors are flocking to safe havens and high-yielding products. In such a situation, nobody has probably expected green arrows from the emerging market (EM) bloc – which has already been a weak zone on slowing growth, currency weakness and Fed tightening concerns.

This is especially true given the 6% losses suffered by the broader emerging market ETF iShares MSCI Emerging Markets (EEM) (read: ETFs in Focus with Continued Emerging Market Asset Outflow).

But investors should note that there are some hidden gems in the emerging market pack which are still in the green this year. Of course, abating worries over faster Fed rate hikes this year and a softer dollar have helped the EM space considerably so far. But there is more to it which has put the below-mentioned EM ETFs in the green bracket year to date (as of February 24, 2016).

Thailand

The Thai stock market has been on a tear this year. This is mainly because of the fact that Thai stocks offer around 4.5% in yield on average. The lure of high yield mainly drove global investors, especially from the Asian neighbor Japan, which is reeling under the pressure of negative bond yields, to Thai assets. Per Bloomberg, Japanese investors lifted their holdings in Thai debt to a 21-month high.

Among the other reasons that have made Thailand the best-performing emerging market this year, the relatively cheaper valuation of Thai stocks compared with most of its Asian cousins, an expected earnings growth of 15% for this year and lower volatility in Thai currency baht were at the forefront (read: 5 Market-Beating International ETFs YTD).

This makes iShares MSCI Thailand Capped ETF (THD) the fund which targets the Thailand equity market – a winner so far this year. THD is up 7.7% in the year-to-date frame (as of February 24, 2016). The fund yields 3.39% annually and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Indonesia      

Indonesia is benefiting from policy easing this year as the country’s central bank has slashed its key interest rate for the second time this year to boost the waning economy. Most recently, the bank cut its benchmark interest rate by 25 basis points to 7% after enacting a similar cut in January (read: Indonesia Slashes Rates Again: ETFs in Focus).

As a result, Indonesia ETF iShares MSCI Indonesia Investable Market Index Fund (EIDO) has added about 5% in the year-to-date frame (as of February 24, 2016). The fund has a Zacks ETF Rank #3 with a High risk outlook.

Turkey

This once-woebegone economy is also sending positive vibes on the economic front. Notably, the country attracted the largest annual foreign direct investment in 2015 since the global financial turmoil. There was a 32% year-over-year growth in FDI inflows to $16.5 billion in 2015.

Notably, slumping oil prices are vital to the Turkish economy as the country imports more than 90% of oil for about 70% of its total energy needs. Turkish ETF iShares MSCI Turkey (TUR) is up about 4% in the year-to-date frame (as of February 24, 2016). However, the Turkish economy is fraught with political risks, inflationary pressure and currency woes. The fund has a Zacks ETF Rank #4 (Sell).

Malaysia  

Though Malaysia is a net exporter of crude oil and thus runs a huge risk on plunging oil prices, the Malaysian stocks have gained slightly this year. The Malaysian economy sagged in the fourth quarter of 2015 but beat market growth expectations. Improved domestic demand made up for declining oil prices.

As a result, iShares MSCI Malaysia (EWM) has advanced 1.7% so far this year. The fund yields 6.41% and has a Zacks ETF Rank #3 with a Medium risk outlook.


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ISHARS-EMG MKT (EEM): ETF Research Reports
 
ISHRS-MSCI THAI (THD): ETF Research Reports
 
ISHARS-MS INDON (EIDO): ETF Research Reports
 
ISHRS-MSCI TURK (TUR): ETF Research Reports
 
ISHARS-MALAYSIA (EWM): ETF Research Reports
 
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