Emerging Market ETFs: Is BRIC Really Back?
16 April 2008 at 10:55 am by Gary Gordon
One of the simplest trading tools used by some professionals is the 200-day moving average. In essence, it is a tool that shows price movement over a particular time interval (e.g., 200 days, etc.).
The 200-day is supposed to be indicative of a long-term trend; that is, when the price of a given investment falls below a 200-day moving average, or trendline, that investment may be experiencing a downtrend. Conversely, when a security rises above the trendline, many exclaim that a new uptrend is emerging.
Speaking of emerging, then… a premier emerging market proxy for BRIC countries (Brazil, Russia, China and India) recently rose above its long-term trendline; specifically, the Claymore BNY BRIC Fund (EEB) is now one of the small percentage of exchange-traded vehicles in a technical uptrend.
Indeed, it would be difficult to dismiss the evidence outright. The Claymore BNY BRIC Fund (EEB) fell below its long-term trend in March, yet recovered by early April. And while it may not be entirely convincing that "emergers" are back, EEB is certainly outpacing one particular herd’s "Fave 5."
One would have plenty of reasons to remain cautious on BRIC countries. China has inflationary pressures. Russia may be relying too heavily on energy to drive its growth. And Brazil’s GDP per capita is not half as impressive as its overall GDP.
Yet these doubts only seem to further my case that regional diversification is superior to individual country picking. I made the same case about the 4 Asian Tigers (Taiwan, South Korea, Hong Kong, Singapore); specifically, the iShares S&P Asia 50 Index Fund (AIA) has been outperforming.
Similarly, the Claymore BNY BRIC Fund (EEB) is providing the best risk-reward relationship for those who wish to access the major players in the emerging world. While price movement via technical analysis can be deceptive, "scoreboard" performance seldom misleads. (See the 1-year data below.)
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
