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Investors are not in favor of emerging markets this year with heavy losses piling up in the space. The biggest bump was seen recently on increased chances of the Fed tapering QE3 and its impact on emerging market capital flows.
Additionally, widening current account deficits, sluggish currencies, rising inflation and political disorder are dulling the appeal for emerging markets. The rising U.S. Treasury yields and the threat of political turmoil in Syria have added further woes to these nations (read: Avoid These 3 Emerging Market ETFs).
These trends have pushed investors out of the broad emerging market securities, leading to the overall bearish outlook. Yet, despite the gloom surrounding the space, a couple of emerging market ETFs have managed to climb and impressed with their double-digit returns in the year-to-date period.
Interestingly, these top performers are spread across various sectors or countries and could be better plays in the current market. This suggests that there have been winners in every corner of the space, even with the sluggish overall trend (read: 3 Emerging Market ETFs Surviving the Slump).
Consequently, investors who have incurred losses from some emerging market funds this year may want to consider looking at any of the following ETFs that we have highlighted below (see more in the Zacks ETF Center):
First Trust ISE Chindia Index Fund (FNI)
This fund follows the ISE Chindia Index, which measures the performance of the liquid firms domiciled either in China or in India. It has accumulated nearly $60 million in its asset base and exchanges less than 12,000 shares per day (read: Rupee Slide Hits Small Cap India ETF).
The product puts nearly 56% of its assets in the top 10 holdings, with Baidu, Michael Kors Holdings and Infosys Technologies being the top three firms. From a sector look, more than two-fifths of the assets are allocated to information technology while another one-fifth goes to consumer discretionary.
FNI charges 60 bps in fees per year from investors and has returned 12.63% so far in the year.
EGShares Technology GEMS ETF (QGEM)
This fund provides exposure to the technology sector of broad emerging markets by tracking the Dow Jones Emerging Markets Technology Titans 30 Index. The fund has been able to gather $3 million in AUM so far and average daily volume is also light with just 2,300 shares changing hands on a daily basis. The ETF is a bit expensive, charging 85 bps in fees per year.
With holdings of 30 securities, the product is somewhat concentrated on its top 10 holdings with nearly 57% of total assets. Tencent Holdings, Baidu and Infosys occupy the top three positions in the basket with a combined share of 26%. In terms of industrial exposure, software & computer services account for 76% share while technology hardware & equipment take the rest.
The fund is heavily exposed to Chinese firms making up for 52% share followed by India (28.94%) (read: Inside the Surging China Technology ETFs). Other countries, such as Russia, Thailand, Chile, Indonesia, South Africa, Poland, and Turkey, make up a nice mix in the fund’s portfolio. The ETF is up about 20.39% in the year-to-date time frame.
iShares MSCI Frontier 100 ETF (FM)
This fund tracks the MSCI Frontier Markets Index, having accumulated $279.6 million in AUM and trading in average daily volume of more than 117,000 shares. The product is well spread across a basket of 101 stocks as each security makes up for less than 6.62% share of the total assets (read: Frontier Markets: A Better Choice for ETF Investors?).
Unlike the other two ETFs, financials dominate in terms of sector exposure, accounting for a whopping 55% of the total assets, while telecom services (14.31%) and industrials (11.36%) round out the top three. In terms of country exposure, the Gulf States dominate, as Kuwait (26.09%), Qatar (18.82%), and the UAE (14.21%) are in the top three spots, while Nigeria also gets a double-digit allocation with 12.09%.
The fund has an expense ratio of 0.79% and is up 11.73% year-to-date.
Investors should note that these products have clearly outpaced the ultra-popular broad emerging market funds like (VWO - ETF report) and (EEM - ETF report) by wide margins (see: all the Emerging Market ETFs here).
This suggests that investors could dig into the space with these ETFs that are still up this year, even with unfavorable macro conditions and terrible performances by most emerging nations so far in 2013.
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