Let’s be blunt: Emerging markets flat-out stunk last year.
Investors who ventured into these once high-flying growth markets got clobbered in 2011, and some of the biggest country-specific losers were all from the emerging-market space. Most of the sector’s declines took place in the second half of the year, as fear of a European debt crisis reached a fever pitch.
This year, however, the script has been flipped.
Although there still are plenty of unanswered questions about Europe’s debt issues, investors have poured back into emerging markets. After punishing losses last year, there have been some astounding gains through the first five weeks of 2012. These gains show just how powerful a draw emerging markets still are with investors. So, which emerging-market ETFs have seen the best performance so far in the young year?
Here are five emerging-market ETFs shedding their bearish coats:
iShares FTSE/Xinhua China 25 Index Fund
Stocks in China’s benchmark big-cap measure of the market, the iShares FTSE/Xinhua China 25 Index Fund (NYSE:FXI), sank 19.1% in 2011. This year, the fund is up almost 16% year-to-date. The smart money sees value in the world’s largest emerging market, and even though China’s economy is growing at its slowest pace in years, it’s still one of the best growth stories out there with GDP climbing nearly 9% in Q4 2011.
iShares MSCI Emerging Markets Index
The iShares MSCI Emerging Markets Index (NYSE:EEM) fund is a great proxy for the entire emerging-market segment. The fund got pummeled with a 20.4% decline in 2011, but in 2012 it’s already up 15.7%. The big turnaround in the broadest measure of the sector shows that it’s not just one or two countries enjoying gains. Rather, the smart money is back to betting on the emerging growth story after a very uncomfortable hiatus in the second half of last year.
iShares MSCI Brazil Index
One of the hottest emerging markets this year is Brazil, with the iShares MSCI Brazil Index (NYSE:EWZ) up 20% in 2012. That’s a huge turnaround from the 25.9% drubbing the fund took in 2011. Investors appear to be betting on the commodity story, as many of the biggest Brazilian companies are involved in the export of coffee, sugar, oil, precious metals and mining extraction. If the commodities story can remain strong, EWZ is likely to keep putting up big numbers.
Market Vectors Russia ETF Trust
In 2011, stocks in Russia truly embraced their national symbol, the bear. The Market Vectors Russia ETF Trust (NYSE:RSX) plunged 29.7%, as investors fled the precarious market in favor of greener pastures. In 2012, the Russian bear has been beaten back into submission. RSX is up 20% in 2012, making it one of the best-performing emerging markets this year. That trend may be set to continue, as the fund saw approximately $142 million in new fund inflows in the final week of January.
WisdomTree India Earnings Fund
By far the biggest winner in the emerging-market sweepstakes so far in 2012 is India. Perhaps not coincidentally, the Indian market was the worst performer among the country-specific emerging funds, with the WisdomTree India Earnings Fund (NYSE:EPI) sinking 40.9% in 2011. But in a dramatic turnaround worthy of a Hollywood movie, investors brought India back off the canvas and turned it into the best-performing emerging markets this year, with EPI vaulting an incredible 31%.