New Financial ETF Sinks or Swims With China

There are a couple of compelling catalysts in favor of the fund. Clearly, growth prospects for the emerging world are very good, certainly better than for the U.S. or Europe over the next few years. If that promise is to be fulfilled, local banks will finance those prospects, and the local service companies (insurers and investment houses) will benefit from a new middle class.

Additionally, those markets, and by extension emerging-market financial companies, aren't dependent on a recovery in the U.S. If the U.S. is as bad off as people fear, it makes sense to expect it will be a long time before American financials are fundamentally healthy, which makes them less-than-ideal investment candidates.

Brighter prospects won't make emerging-market sectors any less volatile. Investors in this space need to be prepared for bigger cyclical moves in both directions. And if Chinese officials can't stabilize lending, the EG Shares Dow Jones Emerging Markets Financials Titans Index Fund will likely get hit pretty hard.

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