ETF Store Insight

Why Emerging Markets Are Attractive

September 8th, 2009 by Joe Massman

As the global economy starts to shows signs of improvement, many analysts think that emerging markets are attractive and for good reason.

As these nations build infrastructure and their consumer spending increases, emerging economies often expand faster than their developed counterparts.  In 2008, the gross domestic product (GDP) of both China and Brazil grew more than 7% compared with just 1.1% for the United States.  Much of this growth was fueled by building and improving infrastructure and the relatively low amount of consumer debt found in these nations, which enabled them to expand faster than more developed economies.

Economists expect these nations to continue to grow, which could further create opportunities for strong corporate profit growth, and in turn appreciation in stocks.  However, one must keep in mind that investing in these nations is riskier than investing in developed countries.  Emerging economies can suffer from unstable political, legal and financial systems, volatile currencies and liquidity issues. 

A good way to access emerging markets is through the following ETFs:

  • The iShares MSCI Emerging Markets ETF (EEM), which is up 79% from its March low. 
  • The Vanguard Emerging Markets Stock (VWO), up 83% from its March low.
  • The Emerging Global Shares DJ Emerging Market Titans Composite (EEG), which is a new ETF, but enables investors to grab exposure to parts of the world the other two don’t and is up 5% since its inception.