This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Thoughts on Emerging-Market ETFs

NEW YORK ( ETF Expert) -- Rob Arnott expressed an intriguing observation in an interview at IndexUniverse.com.

The founder of Research Affiliates explained that the cyclically adjusted P/Es for U.S. stocks and for emerging-market stocks are roughly 24 and 13, respectively. At the previous bull market height of 2007, however, U.S. stocks were much cheaper than emerging-market counterparts; at that time, U.S. stocks collectively chimed in with a cyclically adjusted P/E of 26 while emergers rang the bell at 37.

The Case-Shiller cyclically adjusted P/E (aka CAPE) uses a 10-year rolling average where inclusion of "outlier" data from the 2008-2009 financial collapse may distort the value of the metric. Indeed, the folks at Motley Fool estimated that current CAPE overstates S&P valuation by 38% when outlier data is removed.

Yet, the more important finding may be the fact that, with or without data adjustments, emerging-market stocks may be sporting a sale price that is nearly 2/3 of the value commanded six years ago.

Slowdown fears and outright economic contraction concerns have adversely impacted funds like iShares MSCI Brazil Capped (EWZ), Market Vectors Russia ETF (RSX), WisdomTree India Earnings (EPI) and SPDR S&P China (GXC) for several years. Moreover, central bank policies in the developing world have been less stimulative than the policies of developed countries, causing many to back away altogether. In truth, those that have invested in up-n-coming regions over the last 12 months have more often felt the stabbing pain of the proverbial falling knife, not the the sweet sensation of biting into a Brazilian papaya.

Nevertheless, some emerging-market assets may finally be turning the corner. For example, iShares MSCI Malaysia (EWM) has produced a respectable 15% year-over-year. Its current price is holding above a 50-day and 200-day trendline. In addition, the 50-day intermediate term moving average has stayed above the longer-term 200-day; technical analysts see the development as noteworthy because a bearish "cross-under" has been avoided.

What if valuation is not the key to success with your emerging-market pick?

For example, Poland has cut rates at a remarkably fast clip, sending its overnight bank lending rates to a record low (2.5%). In an investing world where the most monetary stimulus means the best investment, Poland has been a brighter spot than the neighboring euro-zone. One can look at either iShares MSCI Poland (EPOL) or Market Vectors Poland (PLND).

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
SYM TRADE IT LAST %CHG
AAPL $129.09 0.00%
FB $79.75 0.00%
GOOG $571.34 0.00%
TSLA $197.32 0.00%
YHOO $44.11 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

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