(Story updated to add that America Movil plans to invest $8.5 billion to $9 billion this year to upgrade its mobile telecom service across Latin America.)
BOSTON (TheStreet) -- In a clear sign investor sentiment is now "risk on," historically volatile emerging market stock indices are generating double-digit gains this year because the U.S. and European equities are projected to offer slimmer returns.
The benchmark MSCI Emerging Markets Index is up 16.4% this year, double that of the S&P 500 of the biggest U.S. companies, including 14% in the past 13 weeks. It hit a six-month high Monday.
But indicative of how bad things were last year in the sector, the MSCI EM index is down 5% over the past 12 months. The gains of this year could stall given events of the past week. In what should be a boon to emerging market investors' confidence, European Union finance ministers agreed to a $172 billion bailout of Greece to avert what could have been a chaotic default. Just as that occurred, another challenge to investor confidence emerged in the form of higher gas prices worldwide, which can stifle an emerging market economy. That's because Iran said it will soon cut its oil supplies to the 27-nation European Union and has reportedly already turned off the spigot for the U.K. and France over the weekend. As the EU may have to scramble for alternative oil supplies, emerging market countries will also face stiff price hikes if there is limited supply. But long-term, emerging market stocks will continue to offer potentially big returns if demographic trends continue. "Sixty years ago, the region accounted for 68% of the world's population. Today that number has buoyed to 82%," said Morningstar analyst Abraham Bailin, in a recent research note. And emerging market countries, including such giants as China, Brazil and India, are producing a wealthier middle class with the money to spend and invest. In addition, their governments have continued to ease interest rates, which should lead to more economic growth and increased foreign investment. Just look at what two leading U.S. companies have planned for emerging markets in anticipation of their continued growth. Retailing giant Wal-Mart (WMT) reported last week that it is buying a controlling stake in Chinese online shopping company Yihaodian to boost its growing presence in the world's most populous country. China's economy is expected to grow about 8.4% this year, or roughly four times that of the U.S. And on Tuesday, Dunkin' Brands (DNKN), the ubiquitous coffee and doughnut store chain, announced a franchising agreement with India's Jubilant FoodWorks Ltd. to open the first Dunkin' Donuts store in India by June as it bets on the growing preference among a younger and more affluent middle class to drink coffee and eat at fast-food chains. Here are 10 top emerging-market stocks worth considering as long-term investments in inverse order of returns this year:
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV