Bet On The Beaten Down Emerging Markets With This ETF

emerging-markets1The trading scene in the emerging markets, in particular the Asia-Pacific region, took a turn for the worse over the past few months with heightened fears of the Fed curbing its stimulus soon gripping the region and affecting their capital flows. Threats of conflict in Syria and the resultant rise in oil price further intensified the trading turmoil.

Moreover, a continued rise in yields is attracting investments into bonds of developed nations like the U.S. and Canada, and has certainly taken a toll on the Asia Pacific countries. Notably, India, Indonesia and Thailand have been the worst hit thanks to sluggish currencies, current account deficits and inflationary worries (read: 3 Currency ETFs Crushed in Emerging Market Rout).

However, the bearish trends in the Asia Pacific are unlikely to continue in the long term as many countries in the region are stabilizing or showing improvements of late. Plus, with the U.S. facing troubles of its own—thanks to a dysfunctional government—some are beginning to look back abroad for exposure once more.

Bright Spots

With Indonesia’s central bank stepping in to support the rupiah and hopefully restore some confidence into the nation’s financial system, it appears that the selling pressure is finally coming to an end.

Recent data suggests that China, the world’s second-largest economy, is showing some signs of improvement after two years of slowdown too. Both exports and imports have picked up while manufacturing activity has strengthened to the highest level in 16 months.

Malaysia looks resilient and capable of withstanding the storm in the Asia Pacific for the rest of the year. This is largely due to the strong economic fundamentals supported by a healthy balance sheet, low inflation, low unemployment, as well as recovery in both domestic and international demand.

Meanwhile, the Philippines has also shown resiliency when facing global economic turmoil. The nation manages to grow at a robust rate even with some weakness in key developed markets, and the outlook remains quite rosy. In addition, a moderating inflation level supports the growth momentum of the economy.

Moreover, as most of the Asia-Pacific nations are commodity-centric, improving global conditions would definitely aid growth in these economies going forward.

Given this optimism, a look at the top ranked ETFs in the space could be a good idea for investors in the current market uncertainty. One way to find a top ranked ETF in the space is by using the Zacks ETF Ranking system (read: Zacks ETF Rank Guide).

About the Zacks ETF Rank

A look at the top ranked emerging market ETFs can be done by using the Zacks ETF Rank. This technique provides a recommendation for the ETF in the context of our outlook of the underlying industry, sector, style box or asset class. Our proprietary methodology also takes into account the risk preferences of investors.

The aim of our model is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other ETFs with a similar level of risk.

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