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Unemployment has been drifting higher for some of the major developed and emerging economies. U.S. and European nations have seen unemployment levels rise dramatically in the recent past. This has been a major cause of a slow recovery in the U.S. market and a double-dip recession in Europe. (Three Forgotten Ways to Play Europe with ETFs)
According to a recent report from the Labor Department, U.S. unemployment rate dropped to 7.7% in November from 7.9% reported in October,for the first time in four years. This indicated slight recovery in the job market.
However, it should be noted that the decline in the unemployment rate is not really attributed to the creation of new jobs but rather to a decline in the labor force. The biggest job addition was seen in the retail sector because of the extra work force during the holiday season.
Euro-zone unemployment level came in at a historical high of 11.7% with Spain and Greece reporting the highest unemployment rates in the zone. The unemployment rate in Spain came in at 26.2% while Greece recorded a rate of 25.4% (Spanish Bailout: Did It Help European ETFs?). Austria and Luxembourg reported the lowest unemployment rates in the region at 4.3% and 5.1%, respectively in November.
In this environment of rising unemployment, investors may opt to shift their asset base to countries which have a healthier labor market. The nations with a strong labor force remained largely unaffected by the turbulence in the U.S. and European markets. (Forget European Woes with These Three Country ETFs)
In this article we have highlighted five economies which have a healthy level of employment, thereby indicating the possibility of a strong economic performance in future.
Vietnam posted an unemployment rate of 2.29%, among the lowest in the world. However, the rate rose slightly from 2.22% as many manufacturers had to defer some manufacturing operations due to weak demand, resulting from global slowdown. However, Vietnam expects its unemployment rate to decrease in fiscal 2013. In the recently released Global Economic Outlook Report, the International Monetary Fund (IMF) projected Vietnam’s GDP growth at 5.9% 2013. By 2017, GDP growth is forecast at 7.5%. Weakening global consumption demand may however put some pressure on the economy.
Investors seeking to tap this economy in basket form may look to invest in Market Vectors Vietnam ETF (VNM) (Can the Vietnam ETF Continue Its Run?). VNM tracks the Market Vectors Vietnam Index, which provides exposure to the publicly listed companies that are domiciled and listed in Vietnam or derive at least 50% of their revenues from Vietnam.
The fund provides exposure to 33 Vietnamese securities and manages an asset base of $260.2 million. The fund charges a fee of 76 basis points. Last year, the performance of the fund suffered from a very high level of inflation in the country and waning domestic and global demand. But now with the inflation level much under control and the government implementing measures to stimulate domestic demand, the fund delivered a year-to-date return of 8.81%.
Thailand has a rock bottom unemployment rate of 0.63%. Last year’s flood in Thailand hit manufacturing activities in the region leading to shutdown and suspension of operations by many manufacturers. However, the government efforts to fuel domestic demand resulted in a quick recovery (Can Anything Stop These Southeast Asia ETFs?).
In the third quarter of fiscal 2012, the economy beat expectations on the back of solid domestic demand and healthy investment which helped in offsetting the lower demand from global sources. The economy remains resilient to the weak U.S. economy, slow growth in China and the European crisis.
IMF expects the economy to post growth of 7.5% in 2013. Investors seeking for a pure play in the economy can look to invest in MSCI Thailand Investable Market Index Fund (THD). THD is home to 92 securities of Thailand which are mostly large caps. In this basket of securities, the fund invests an asset base of $697.9 million. The fund charges a fee of 59 basis points annually.
The unemployment rate in Switzerland is at 3.1%. In an environment of aggravating unemployment and deep recession in the Euro-zone, Switzerland remains an intriguing choice for investors in Europe.
The country has a budget surplus and a credit rating of ‘AAA’. Though the Swiss National Bank (SNB) intervenes to maintain the currency peg at 1.20 against the euro; withrising turbulence in the European market, it has become extremely difficult for SNB to maintain the peg. If the peg is removed it may lead to the currency gaining not only against the dollar but against the euro as well and may pose a threat to the Swiss economy.
Investors who are positive on the long-term prospects of the country can invest in iShares MSCI Switzerland Index Fund (EWL). Through EWL an investor can tap the Swiss economy through 40 large cap securities of the region. In this basket, the fund invests $699.5 million while charging an expense ratio of 52 basis points from the investor (ETFs for the Most Competitive Countries on Earth).
South Korea sees its unemployment level at 2.8%. Despite being one of the emerging markets, South Korea has been resilient to a weak U.S. economy and the European woes. The buoyancy of the economy can be attributed to the strength of three world beating Korean companies, namely, Samsung, Hyundai Motor Co. and its affiliate Kia Motors Corp (South Korea ETF Investing 101).
According to the Korean brokerage houses, the South Korean economy is expected to grow at the rate of 3.2% in 2013. The country still has plenty of room to grow going by its gross national income per capita of $20,870 last year, compared with Japan’s $45,180 and Hong Kong’s $35,160, according to World Bank data.
As the economy is highly dependent on exports, it was somewhat hurt by the weak demand from U.S. and Europe. But strong domestic demand helped offset the weakening global demand.
For a broad exposure to the South Korean economy, investors can have their asset invested in iShares MSCI South Korea Index Fund (EWY). In a holding of 107 securities which are mostly large caps, the fund invests an asset base of $3 billion and charges a fee of 59 basis points.
Singapore has an unemployment rate at just 1.9%. An affluent economy, Singapore offers investors an option worth the investment when growth of the world’s largest economies has taken a toll. (Singapore ETFs for the Rise of Asian Financial Centers)
Attributable to declining exports to Europe, Asia and U.S., many countries have suffered low growth with Singapore not being an exception. Also, the Singapore currency has been rising which makes its exports more expensive. IMF estimates the economy to grow at 2.1% for 2013.
Investors can tap this economy through iShares MSCI Singapore Index Fund (EWS). EWS has amassed over $1.6 billion and trades a robust 1.9 million shares a day while charging investors 52 basis points a year in fees for its services. The fund provides exposure to 32 Singapore securities.
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