Looking For EM Exposure? Try These ETFs

The start of 2017 was dominated by developing economies. The entire bloc saw the best start to a year since 2012. The ultra-popular iShares MSCI Emerging Markets ETF EEM) is up 30.3% so far this year against 17.8% recorded by the S&P 500.

Improving global economic growth, a subdued dollar despite Fed policy tightening, a rebound in commodity prices, better-than-expected earnings, accommodative policies and of course cheap valuation led to this gain. The surge in the Chinese technology sector is another important factor (see all Asia-Pacific (Emerging) ETFs here).

Investors should note that the emerging markets are better-positioned going into 2018. Inside the bloc, optimism is brewing even more in some specific countries. Below we highlight investing options in those.

India – iShares India 50 ETF (JK:INDY)

The Indian economy is back on track as it has emerged from the short-term adverse impact of the goods and services tax and remaining after-effects of demonetization (effected a year ago). The economy grew 6.3% in the July-September period, almost in line with market estimates, but higher than the three-year low growth of 5.7% scored in the April-June quarter. Investors, who want to dip their toes in this new-found optimism, may play this fund (read: India ETFs in Focus as GDP Rebounds).

The fund looks to track an index composed of 50 of the largest Indian equities. Banks (26.7%), Refineries/Marketing (10.6%) and Computers – Software (10.4%) take the top three spots of the fund. The Zacks Rank #1 (Strong Buy) fund charges 93 bps in fees (read: 8 ETF Picks for December).

China – VanEck Vectors ChinaAMC CSI 300 ETF (AX:PEK)

The largest economy of the developing nation, China, has experienced the best start to a year since 2006 this year. The economy expanded 6.8% year over year in the third quarter, in line with the Reuters estimate and down from 6.9% in the second quarter.

Also, China intends to “relax market access for foreign investment and expand access to its services sector, as well as deepen market-oriented reform of its exchange rate and financial system, while at the same time strengthening state firms” (read: Be Thankful to These China ETFs This Year).

Moreover, MSCI (MSCI) announced in June that it would add China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index, beginning June 2018. The move marks China’s credibility as a major investment destination in the world (read: What Does the MSCI Inclusion Mean for China A Shares and ETFs?)

The fund has a Zacks ETF Rank #2 (Buy). The underlying index of the fund – the CSI 300 Index – comprises the 300 largest and most liquid stocks in the Chinese A-share market.

Thailand – iShares MSCI Thailand Capped ETF (AX:THD)

The Thailand economy grew 1% sequentially in the third quarter of 2017, beating market expectations of 0.75% growth. The growth rate was however slower than an upwardly revised 1.4% expansion in the prior quarter.

The country's GDP grew 4.3% from a year earlier in the September quarter of 2017 versus an upwardly revised 3.8% growth in the second quarter of 2017 and matched market expectations. The year-over-year growth marked the strongest expansion since the first quarter 2013. This hints at a decent growth momentum for the economy.

This fund offers exposure to companies based in Thailand. Financials (21.03%), Energy (17.7%), Industrials (11.6%) and Consumer Staples (10.9%) are the top four sectors of the fund. The product has a Zacks ETF Rank #2.

Indonesia – iShares MSCI Indonesia ETF EIDO

Indonesia's GDP grew 3.18% sequentially in the third quarter of 2017, easing from 4.0% expansion in the previous period and missing market expectations of 3.23%. Indonesia’s economic growth is likely to reach 5.1% in 2018 as its massive infrastructure projects are shaping up to ease the pressure from consumption, according to Citi Research.

The Zacks Rank #2 fund is heavy on the financial sector (36.1%) followed by Consumer Staples (14.9%), Consumer Discretionary (13.3%) and Telecommunications (12.9%).

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