Here on July 8, 2010, stock assets in the U.S. are looking to trumpet a third straight day of gains. Yet corporate earnings guidance for the remainder of the year will determine whether or not the ultimate developed world market can maintain upward momentum.
The knock on developed world stocks isn’t that they aren’t cheap. It’s that the countries where those companies reside face monstrous macroeconomic headwinds. Deficits, regulation, taxation, underfunded pensions, a real estate hangover, limited job growth — it’s enough to make one’s head spin.
Even when we talk about specific companies with great balance sheets in Europe or the U.S., we recognize that 40%-50% of the revenue is coming from foreign operations. Clearly, you can find excellent income producers stateside, yet you better “jet-set” if you want capital appreciation potential.
In fact, there are a number of emerging countries where the GDP growth is very real, while the debt to GDP ratios are quite manageable. The latest report that I read on Brazil pegged Brazil’s government debt at 40% of GDP. And while developed country debt-to-GDP ratios are expected to rise over the next 5 years, Brazil estimates that its debt-to-GDP will fall to 30%!
It’s not that the 4 horsemen of world growth — BRIC’s Brazil, Russia, India and China — are without their problems. India faces inflation, cultural caste system issues and high P/Es. Russia’s government is always a concern, and it’s economy is inordinately dependent on energy. China needs to manage large swings in both real estate and stocks, while Brazil must move beyond its materials-based economy.
Still, the fact remains that developed countries struggle with stagnant growth and budget battles which can strangle growth for quite some time. In contrast, the developing world must contend with “growth gone wild” as well as the potential for missteps on managing inflation. Which “macro” headwinds would you rather face… too little growth or too much growth?
At least for the time being, technical uptrends support my contentions. Specifically, 10 countries have a representative ETF exhibiting a long-term technical uptrend. Each of the country ETFs in the table below are currently above a 200-Day exponential moving average (EMA) and… 9 of the 10 are emerging country ETFs.
| Country ETFs Showing Long-Term Technical Uptrends (7/8/2010) |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
% Above 200-Day EMA |
| |
|
|
|
|
|
|
| Market Vectors Indonesia (IDX) |
|
|
|
12.7% |
| iShares MSCI Thailand (THD) |
|
|
|
10.0% |
| Global X FTSE Columbia 20 (GXG) |
|
|
9.8% |
| iShares MSCI Chile (ECH) |
|
|
|
8.0% |
| iShares MSCI Malaysia (EWM) |
|
|
|
6.4% |
| iShares MSCI Turkey (TUR) |
|
|
|
5.4% |
| iShares MSCI Singapore (EWS) |
|
|
|
3.4% |
| Market Vectors Brazil Small Cap (BRF) |
|
|
1.7% |
| iShares MSCI Peru (EPU) |
|
|
|
1.5% |
| iShares MSCI Japan Small Cap (SCJ) |
|
|
0.7% |
You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can review more ETF Expert features here.
Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company receives advertising compensation from Invesco PowerShares Capital Management, LLC and Geary Advisors, LLC. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
Tags | "emerging country etfs", "emerigng country etf list", "etf developing markets", "etf emerging markets list", "list etf emerging markets"
