To everybody's surprise, this year started off with most emerging markets regaining their ground lost in 2013 due to ‘taper tantrums'. In fact, some of these markets proved huge contributors to global recovery (Read: 3 International ETFs Beating SPY This Year)
Developing nations were assisted by a number of factors in this time period that helped them to weather QE fears, and issues regarding European growth. Chief among these positive factors were pro-growth political reform in some nations like India and Indonesia, easing volatility in currency, a rapid pace of industrialization and urbanization and an ultra-low interest rate environment, all of which contributed to solid growth levels for many nations.
However, all EM nations have not performed satisfactorily as commodity-centric nations became the victims of the commodity crash which may arguably still be witnessing now. The broader emerging market ETFs Vanguard Emerging Markets ETFs (VWO) and iShares Emerging Markets ETF (EEM) are down more than 3% this year and many have fared even poorer.
Still, there are some bright spots sizzling with optimistic political changes and favorable fundamentals, and promise the same trend even in 2015. These country ETFs have posted stellar returns this year (read: 4 Emerging Market ETFs to Consider for Q4).
This was in stark contrast to the renewed deflationary worries in the Euro zone and Japan, prolonged slowdown in the biggest emerging market China and crash in the two pillars of BRIC nations – Brazil and Russia. Below we highlight those markets that impressed this year, and the ETFs that track these markets as well:
India – MSCI India Small Cap Index Fund (SMIN)
The Indian market has found many events to celebrate this year including the much-anticipated win of the pro-growth leader Narendra Modi in May, robust corporate earnings, drastic decline in inflation helped by the unbelievable decline in global oil prices and a stable currency despite the ascent of the greenback (read: Yet Another Reason to Buy India ETFs Now).
Economically, things are just falling in place for India which in turn took the related ETFs to great heights. All India ETFs returned impressively this year with SMIN topping the list. It is such an ETF with about one-fourth of assets invested in the financial sector. Consumer discretionary takes the next spot with about 20% exposure.
Moreover, tapping a small-cap ETF is surely a decent bet in the current context as these pint-sized stocks normally revolve around the domestic economy and is less exposed to global events. SMIN – a Zacks #2 (Buy) ranked ETF with a High risk outlook ─ is up 40% year to date and is the best performing emerging market ETF so far this year.
Investors should note that other India ETFs like India Small Cap ETF (SCINX),India Small-Cap Index ETF (SCIF), S&P India Nifty Fifty Index Fund (INDY) and India Earnings Fund (EPI) have advanced about 36.5%, 30.6%, 22.5% and 20.5%, respectively.
