NEW YORK (SmartStops) -- As the developed world continued to struggle out of the Great Recession in 2010, emerging markets performed relatively well, and they're expected to sustain this growth and performance in the coming year.
China continues to draw headlines and steal most of the attention, but in the coming year, Latin America may be the place to look.
Inflationary threats and real estate bubbles have forced China to increase its benchmark interest rates for the second time in three months and increase banking reserve ratios to reduce risk, which could hinder future growth.
A different song is being sung in Latin America as inflation is expected to remain subdued. This is expected to lower pressure on central banks to raise interest rates.
According to experts at Bank of America/Merrill Lynch, the true driver behind Latin America's prosperity in the coming year is expected to be domestic consumption, driven by increased purchasing power.
Many Latin American nations, such as Brazil, Chile and Peru, are rich in commodities. As demand for energy commodities such as crude oil and agricultural commodities such as corn and sugar remain insatiable worldwide, these nations are bound to reap the benefits of rising commodity prices. Increased commodity prices and underleveraged companies and households create the perfect mix to fuel domestic growth in these nations.
To gain access to Latin America, one could consider the following:
iShares S&P Latin America 40 Index Fund
, which is a diversified play on Latin America that allocates 56.45% of its assets to Brazil, 24.53% to Mexico, 12.29% to Chile and 5.98% to Peru. ILF allocates nearly 26.2% of its assets to materials, 21.9% to financials and 12.8% to consumer staples.
SPDR S&P Emerging Latin America ETF
, which allocates 64.57% of its assets to Brazil, 20.58% to Mexico, 10.41% to Chile and 4.45% to Peru. GML devotes nearly 24.7% of its assets to materials, 19.9% to financials and 13.4% to energy.
At the time of publication, Grewal had no positions in stocks mentioned.
--Written by Kevin Grewal of Smartstops.
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Kevin Grewal is the founder, editor and publisher of
ETF Tutor and serves as the editor at
www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.