Invest in Emerging Markets using these new ETF’s

Friday, June 19, 2009
By Faisal Laljee
Lately, it seem like new ETF’s sprout almost every week. ETF’s are a very popular and cheap way to invest in a group of stocks that share common traits. KOL for coal related stocks, MOO for agriculture related names, EEB for BRIC countries, and a plethora of others for shorting or investing in global markets as well as commodities and currencies.

Following are some new ETF’s to diversify across some new emerging markets that could be the BRICs of tomorrow. Please do keep in mind that some of these ETF’s are extremely risky and volatile, and have little to no information available online. However, for investors who would like to put some money to work in riskier, but potentially explosive markets, the following list is a great start.

GULF – As the ticker symbol suggests, this ETF invests in companies from the Gulf countries, including UAE, Bahrain, Jorda, Kuwait, Oman, Qatar and Egypt among others. In fact, this ETF only invests in dividend paying stocks from these countries.

AFK – This is one of the riskiest ETF’s, yet it is also the most promising one. Africa has been on fire, except that we don’t hear about Africa outside the context of Nigerian corruption, famine and disease. However, countries like Mozambique, Angola, Zambia and Kenya are fast developing. I know a few people working in these countries and there is some noticable shift of talent from parts of Europe to Africa. A bit of warning though, a big part of this ETF invests in Nigeria, which is considered one of the most politically unstable regions in the world. But hey, at some point, so was Russia. This is my pick of the bunch!

MES – Another new ETF covering the Gulf states. According to Roger Nusbaum of theStreet.com and Random Roger, this ETF consists of investments in Kuwait (52%), U.A.E. (25%), Qatar (15%), and some Oman and Bahrain.

PMNA – Covers countries like Egypt, Kuwait, Qatar and Morocco across parts of the Middle East and North Africa. For some, this is a little too much concentration in a select region Egypt (21%), Kuwait (16%), Jordan (14%), Morocco (14%), and Qatar (13%) make up the bulk of this investment.

GAF – S&P’s Emerging Market fund covers Africa and the Middle East, including Arab Bank, Sasol (SSL), and Israeli Chemicals. This is a more established fund and more information is available online.

FRN – Another more experienced ETF, this one is heavily weighted towards Poland (24%), Chile (21%), and Egypt (17%) with little to no exposure to Middle-east or Africa, except of course Egypt. And if you are a fan of Borat, if you are a fan of Borat. this ETF also gives you access to Kazakhstan, along with Latvia, Georgia, Estonia and other Eastern European countries.

One big surprise is the lack of a Vietnam fund. I wrote a post on the prospects of Vietnam a few years back under the title “Check out Vietnam“, and despite some positive feedback on the market even after 2 years, I can’t give readers a relatively safe way to play Vietnam. There is a Vietnam Opportunity Fund (VOF.L) that trades on the London Stock Exchange For more on investment opportunities in Vietnam, check out http://vnmoney.wordpress.com/

Despite the sometimes less obvious nuances between these ETF’s, they tend to trade relative to each other, with no one ETF having outclassed the others. Owning one or two of these in your portfolio is a better long-term prospect than any of the BRICs at this stage.

– Faisal Laljee
Full Disclosure: I do not own any of the ETF’s or stocks mentioned here but my position can change anytime without notice.

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4 Responses to “Invest in Emerging Markets using these new ETF’s”

  1. Commenter Abbi

    On the second ETF, do you mean FRN? Right now it’s got a ticker of XFRNX

    #592
  2. Faisal Laljee

    I edited the post. I didn’t realize they were the same even though the diff tickers fetch a different price.

    #593
  3. Tapan

    Thanks for recommending ETFs. I am a fan of ETFs. The general rule of thumb for a diversified portfolio is to have atleast one stock from each sector. But the number of stocks in the portfolio do matter for better mgmt purposes.
    In general one diversified portfolio can contain : energy, retail, telecom, health care, tech, banking and international. Do you recommending owning these new ETFs and increasing the international exposure to an existing portfolio or creating a new one?
    Tapan
    http://inquisitiveaboutfinance.blogspot.com

    #594
  4. Lisa

    ETFs are attractive investments because of their low cost, tax efficiency, and stock-like features. It changes the way we construct investment portfolios. But the charm spoils when ETFs chose untested indexes, followed by overwhelming number of choices. Not sure what is the mix of multiple markets indices in ETFs – emerging, developed, etc ? With the right international mix, it could be the best investment option.

    Hedge Fund Jobs

    #605

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