5 Broader Emerging Market ETFs Surging This Quarter

Emerging market investing has gone sour recently on slowing growth, a potential decline in foreign direct investment on a likely cease in cheap money inflows from the U.S. (post lift-off), a stronger greenback and slouching commodities. No doubt this time around, emerging markets are more hardy to the Fed blows than they were in 2013 when taper talks resumed, but threats of underperformance still persist.

Investors should note that several market researchers hinted at weak global growth for the coming years and cut their estimates. For example, the Organization for Economic Cooperation and Development (OECD) slashed global growth estimates twice in three months. The organization now projects that the global economy will expand 2.9% in 2015 and 3.3% in 2016, down from the prior guidance of 3.6% for both years.

For the emerging markets, protracted slowdown in the largest region, China, has been a huge concern and its ripples in the other parts of the bloc are souring the sentiments over the region. Moreover, China accounts for a gigantic portion of the global commodity market. Thus, a long-drawn-out weakness in this economy has weighed heavily on commodities (read: Bridgewater Slashes EM ETF Exposure; Should You?).

This in turn dealt a blow to two other commodity-rich emerging markets, Brazil and Russia, which are now facing recessionary threats. IMF expects the Russian economy to contract 3.8% this year and 0.6% in the next, while Brazil's economy is expected to shrink by 3% in 2015 and 1% in 2016. However, the OECD expects both the struggling economies to return to growth by 2017.

Within the bunch, India seems to be a winner, though it has its share of problems in the form of political complexity and the resultant delay in application of pro-growth reforms by Prime Minister Narendra Modi.

In such a backdrop, iShares MSCI Emerging Markets ETF (EEM - ETF report) has added about 6.6% so far this quarter (as of November 20, 2015) after the MSCI Emerging Market Index lost about 19% in Q3 – the largest quarterly retreat in four years – instigated by the Chinese market upheaval, per Bloomberg.
 
But investors should note that not all emerging market ETFs have delivered lower than 10% gains so far this quarter. In fact, Chinese ETFs returned superbly after the stock market rout in Q3 when the market had a bloodbath. Several China ETFs, especially A-Shares ones, returned more than 20%. Several Latin American ETFs too have given stellar returns, some on political hopes while others on compelling valuation.
 
However, since particular country-ETF investing looks risky in the present market backdrop which might not sustain returns at any point of time on any single issue, below we highlight a handful of broader emerging market ETFs that have given impressive returns even in a tough operating environment.Broader market options appeared better picks as the strength of one economy often compensates the weakness of the other.
 
Emerging Markets E-Commerce ETF (EMQQ– Up 23.5%

The Internet and e-commerce industry is developing fast with the increased use of social networking sites and online trading as well as the growing adoption of smartphones and other mobile Internet devices. So, this product has more to do with technological expansion in the emerging markets rather than reflecting the slowing potential of those economies. In fact, EMQQ can succeed on the back of a fast-expanding middle class population of emerging nations (read: These New ETFs Could be Big Winners).

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