This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

ETFs for Countries With Wiggle Room

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ETF Expert) -- There's a tendency for many writers, analysts and money managers to lump all industrializing nations into a single entity. For better or worse, the popularity of Vanguard Emerging Markets (VWO) and iShares MSCI Emerging Markets (EEM) illustrates the way the developed world chooses to invest money. (Heck, Jim Cramer recently described the investing environment in terms of a four-legged stool, anchored by the U.S., Europe, China and the "emerging markets.")

The merits of aggregation aside, some governments in specific emerging economies have more ability to stimulate economic activity than others; that is, there are countries that may be able to lower interest rates or enact spending initiatives comfortably, and there are those where debt ratios and/or inflation are too high for fiscal and monetary easing.

In the 1/28/2012 edition of The Economist, there's a fascinating feature on exactly which countries may have the most wiggle room to ease. The publication devised an index that incorporated inflation, excess credit, real interest rates, currency exchange movement, current account balance, budget balance and government debt. (Note: My preference might have included a grade for political climate as well, but perhaps that might have been too subjective.)

Follow TheStreet on Twitter and become a fan on Facebook.

The Economist contends that the resulting "wiggle-room index" offers a rough idea of which emerging economies might be better positioned to deal with economic weakness. It turned out that Indonesia, China, Singapore, Chile and South Korea had the most room of 27 "emergers" to maneuver on fiscal and monetary policy, whereas Egypt, India and Poland had the least.

How might this information be useful to ETF investors? Below, I laid out the 2011 performance for each country fund as well as the month-over-month performance here in 2012.

Emerging Market ETFs: Country's Room to Ease Fiscal and Monetary Policy
Entire Year 2011 % 1 Month %
Most Room to Ease
1 iShares MSCI Indonesia (IDX) -0.6% 11.2%
2 PowerShares Golden Dragon China (PGJ) -25.0% 12.8%
3 iShares MSCI Chile (ECH) -26.5% 9.7%
4 iShares MSCI South Korea (EWY) -13.5% 11.9%
5 iShares MSCI Singapore (EWS) -18.8% 15.9%
6 Market Vectors Russia (RSX) -28.2% 17.5%
Least Room to Ease
6 iShares MSCI Turkey (TUR) -36.6% 24.0%
5 Market Vectors Vietnam (VNM) -43.8% 19.2%
4 iShares MSCI Brazil (EWZ) -37.3% 17.7%
3 iShares MSCI Poland (EPOL) -32.0% 20.8%
2 WisdomTree India Earnings (EPI) -40.5% 27.7%
1 Market Vectors Egypt (EGPT) -51.7% 31.9%




One thing that it is abundantly clear, stocks had already been factoring in which emergers have less room to ease. Indeed, the ETFs for countries with the least maneuverability were brutalized the most in 2011. For example, BRIC components PowerShares China (PGJ) and Market Vectors Russia (RSX) experienced drawdowns of -25.0% and -28.2% respectively. And yet, BRIC components Brazil and India fared even worse, with Brazil (EWZ) plummeting -37.3% India (EPI) shedding -40.5%.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs