Latin America ETFs Break Gloom

NEW YORK (TheStreet) -- When it comes to venturing into the international markets at this time, the best strategy is one that includes turning off the TV.

For months, the investing-related media has remained unwaveringly focused on the economic woes facing the members of the European Union monetary bloc. While the situation facing Italy, Spain, and other troubled regions of the EU is dire and is certainly worth monitoring, the constant stream of doom and gloom can be deafening for investors.

Looking to the closing weeks of the year, I encourage investors to make an effort to peel themselves away from the drama unfolding in Europe and redirect their focus on other corners of the globe. By expanding your geographic focus, you may find that there are still pockets of strength within this otherwise treacherous investing environment.

Although they have largely flown under the radar in recent months, many Latin American nations appear to be in a favorable position. I have set aside respectable slices of a number of my client portfolios to countries south of the United States.

Over the course of the year, nations such as Chile and Peru have already enjoyed robust economic expansion in the face of looming doubts about the growth picture elsewhere. In addition, these countries and others like it are in a favorable position from a policy perspective.

Whereas many have expressed their concerns about the lingering number of options available for policymakers in the U.S. and other parts of the globe, analysts note that Latin American central banks still have plenty of tools that can be used to ignite strength in the event of a near-term slowdown.

In addition, while the troubles facing Europe have affected the performances of Latin American nations, many have noted that the overall impact on this region's markets will likely be limited. China is a far more important factor to keep an eye on as the continued demand from this emerging market giant will be crucial to buoying the expansive natural resource industries of nations like Brazil, Chile, Colombia, and Peru.

I am not alone in my bullishness towards this corner of the globe. In a report from The Miami Herald, Latin America is looked upon as a region that is particularly well prepared to defend against the threat of a sweeping global slowdown. Looking even further down the road, one source forecasted that Latin America could be in the midst of its best decade in 50 years.

The ETF universe offers a wide variety of products aimed at capturing the performance of our southern neighbors. However, care must be taken when determining where best to place bets.

While it is the largest and likely the most-closely watched of the Latin American economies, Brazil may not be the most sure bet for conservative investors at this time. As we have seen throughout 2011, the iShares MSCI Brazil Index Fund ( EWZ) has been a noticeable laggard against other Latin America ETFs.

Looking ahead, two pressing issues will play a major role in directing the fund's action. For one, its ample exposure to international commodities giants such as Petrobras ( PBR) and Vale ensures that its performance will be closely linked to global market sentiment. Secondly, the resilient appreciation of the Brazilian real still threatens to upend the nation's growth picture.

The iShares MSCI Chile Investable Market Index Fund ( ECH) is a better bet looking forward. Despite being a major player in the copper industry, the nation's government remains optimistic about the Chilean economy in this questionable market environment. Last week, the central bank opted to keep its benchmark interest rate unchanged.

In addition to the Chilean government's apparent optimism, ECH's portfolio also appears well suited to defend against turmoil. Utilities are the most heavily-represented sector, accounting for nearly a quarter of the fund's assets.

Peru should also be on the radar. Over the most recent three month period, the iShares MSCI All Peru Investable Market Index Fund ( EPU) has been a notable outperformer, leading all other single nation Latin America-focused ETFs.

Mexico's proximity to the U.S. could make it vulnerable to choppy action in the event that the domestic market heads lower. However, for now the iShares MSCI Mexico Investable Market Index Fund ( EWW) is enjoying some impressive momentum gains. Like ECH, EWW is well-suited for questionable action. America Movil ( AMX) and Walmart de Mexico top the fund's telecom- and consumer-concentrated portfolio.

It is easy to become absorbed watching the concerning story play out across the European Union. However, I encourage investors to avoid letting this saga cloud their global perspective. While it may not be commanding the same number of headlines, Latin America is another region to keep a close watch over. For ETF investors, nations here may provide a welcomed respite from the day-to-day macroeconomic turmoil.

Note: From all of us at Dion Money Management and the Fidelity Independent Adviser, we wish you and your family a very Happy Thanksgiving. We are grateful for your continued readership.

Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management owned the iShares MSCI All Peru Investable Market Index Fund, iShares MSCI Chile Investable Market Index Fund and iShares MSCI Mexico Investable Market Index Fund.

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