Broadly speaking, emerging markets ETFs, diversified funds and select country-specific plays, have been duds this year.
That point was hammered home last month when major diversified emerging markets ETFs such as the Vanguard FTSE Emerging Markets ETF (NYSE:VWO) and the iShares MSCI Emerging Markets Index Fund (NYSE:EEM) bled assets and tumbled lower. In the past month, EEM has lost five percent.
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At the regional level, Latin America, excluding Mexico, is proving to be an egregious offender. Including Tuesday's drop, the iShares S&P Latin America 40 Index Fund (NYSE:ILF) is down 7.7 percent in the past month and resides just 5.6 percent above its 52-week low. The SPDR S&P Emerging Latin America ETF (NYSE:GML) has not been a peach, either. If support at $67 fails out, that ETF is likely heading back its lows as well.
Things are particularly bad at the individual country level as the following major ETFs highlight.
iShares MSCI Brazil Capped Index Fund (NYSE:EWZ) The iShares MSCI Brazil Capped Index Fund gets picked on a lot in this space, but the bearishness on this ETF is not without merit. Latin America's largest economy is dealing with a confluence of factors, none of which are positive. There is the global commodities slowdown and escalating concerns about Brazil's readiness to host the 2014 World Cup.
Last week, in a stark departure from what is being seen elsewhere in the developing world, Brazil raised interest rates in a bid to fight inflation. Here is the ominous equation faced by Brazil at the moment: Rising rates + high inflation + slightly rising unemployment = Potential stagflation.
EWZ is flirting with $50 again, an area where it has previously found support, but a high-volume violation of that level could easily take another 10 percent off this ETF.
iShares MSCI All Peru Capped Index Fund (NYSE:EPU) Sometimes it is not fun being right, but we did forecast EPU's demise in February, well before gold truly rolled over. The situation here is easy to explain. Peru is South Amercia's fastest growing economy, but growth is slowing. That is not even the worst problem.
More concerning is that Peru is the world's largest silver producer and a major copper and gold producer, too. That toxic cocktail has helped EPU lose almost 19 percent in the past 90 days. Since the start of the second quarter, EPU has lost almost $84 million in assets. A new 52-week low? It happened early in Tuesday's session. When EPU closes below $35, which could happen this week, it will be the first time since October 2011.
iShares MSCI Chile Capped Investable Market Index Fund (NYSE:ECH) If falling silver prices hurt Peru and EPU, then falling copper prices will definitely catch up to Chile and ECH. While the materials sector is not as prominent in this ETF as some think, sometimes perception becomes reality.
Actually, the reality is Chile is the world's largest copper, but materials names only represent 12.5 percent of ECH's weight. Still, plenty of traders treat ECH as an equity-based copper proxy and that explains the 14.3 percent three-month decline. Like EPU, ECH hit a new 52-week low earlier Tuesday.
Not To Be Outdone In the essence of brevity, we will save the gory details for another time, but the following Latin American ETFs not addressed at length in this piece are not screaming buys at the moment: The Global X FTSE Colombia 20 ETF (NYSE:GXG), the Market Vectors Brazil Small-Cap ETF (NYSE:BRF) and the iShares MSCI Brazil Small Cap Index Fund (NYSE:EWZS).
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