Things haven’t been too sweet for investors in emerging markets over the last couple of years, which spent much of 2015 — and 2014 for that matter — dropping like stones.
The uber-popular iShares MSCI Emerging Markets ETF (EEM) managed to return a negative 16% in 2015. So far this year, the EEM has dropped an additional 7%.
The reason has been a complex variety of factors.
From the rising dollar — which makes it harder for developing countries to pay their debts — to falling commodity prices — which are a prime source of wealth — have all played into the fall of developing markets.
And let’s not forget China. Some big-time market pundits like DoubleLine’s Jeffrey Gundlach are calling for further declines, so it’s easy to see why investors have abandoned emerging economies.
But there are opportunities.
Longer term, many of the same bullish factors that propelled developing markets forward are still very well in place. The key for investors is that they need to be selective when diving into the emerging markets space.
With that said, here are three emerging markets exchange-traded funds to buy immediately!
Emerging Markets ETFs: iShares MSCI Taiwan ETF (EWT)
Expense: 0.64%, or $64 per $10,000 invested
One of the keys to finding success in emerging markets is find those nations focusing on the real growth sectors. In this case, we’re talking about technology and Taiwan.
Taiwan continues to be a leading player within the semiconductor and smartphone sectors, but the nation has also continued to up its biotechnology game. As parts supplier for computers, robots, smartphones and now drugs, Taiwan has experienced some pretty decent growth over the course of its history.
And with technology usage and adoption continuing unabated, Taiwan continues to get the nod as the contract manufacturer/parts supplier to much of the sector.
The iShares MSCI Taiwan ETF (EWT) offers the easiest way to play the tech-focused emerging market. EWT tacks 91 different Taiwanese heavy hitters and has roughly 60% of its holdings in technology-related stocks. The ETF is down about 4% and can now be had for a price-earnings of 13.
That’s a great entry price given that its long-term tech story is still intact. All in all, EWT is one of the best emerging markets ETFs you buy today. Expenses for the emerging market ETF run 0.64%, or $64 per $10,000 invested.
Emerging Markets ETFs: WisdomTree India Earnings Fund (EPI)
India might finally be living up to its much-hyped emerging markets potential. After years of struggling under bureaucratic red tape and corruption, India is crushing its emerging markets rivals with a vengeance.
All of which is due to the election of Prime Minister Narendra Modi back in 2014.
Modi has pushed heavily for curbing corruption and India’s inefficiencies, as well as boosting infrastructure spending, job growth and numerous other pro-economic policies. So far, Modi and his goals have been working. India managed to record an adjusted 7.2% gain to its gross domestic product for the fiscal year ending March 2015.
Since then, things have gotten better. For example, the drop in oil prices have helped its current account deficit immensely.
Which is why investors should bet on the emerging market with the WisdomTree India Earnings Fund (EPI).
The kicker is that EPI weights its holdings based on profits. That essentially kicks-out firms that consistently fail to produce. It also has allowed EPI to produce as well, beating its market-cap weighted rivals since its inception.
Expenses for EPI run at just 0.83%.
Emerging Markets ETF: iShares MSCI Mexico Capped ETF (EWW)
While most of the election rhetoric focuses on illegal immigrants and drug cartels, Mexico is still a hot destination for investors’ emerging market money. The reason? It’s a manufacturing powerhouse.
Thanks to numerous free-trade agreements, Mexico has become the hot spot du jour for American manufacturers.
Firstly, energy costs are dirt-cheap due to new natural gas pipelines; secondly, transportation costs are next to nil as both rail and truck traffic are already robust; lastly, Mexico benefits from dirt cheap labor costs.
This trio of benefits continues to work in Mexico’s favor as a prime destination for all varieties of manufacturing.
And while most of Mexico’s goods do head north to America, it’s not staying that way. The emerging market nation has signed agreements with the European Union and Japan. That means that Mexico will be one of the world’s biggest places to make stuff going forward.
And that could make the iShares MSCI Mexico Capped ETF (EWW) a big buy for the long haul.
EWW tacks 63 different Mexican stocks — including telecom America Movil SAB de CV (ADR) (AMX) and beverage bottler Femsa (FMX). More than half of EWW’s holdings are in sectors or stocks that benefit from exporting/manufacturing.
With Mexico’s manufacturing renaissance well at hand, EWW could be one of the biggest beneficiaries.
Expenses for the ETF run just 0.47%.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.