Not every market is alike, for example Russia offers excellent growth with great political risk and government intervention whereas China is mostly export driven economy and susceptible to a fall out in the global markets. It is quite common for them to fall 60% and than give a return of 100% next year. When global market suffers, like the one in 2008 most of the financial institutional investors will be quick to move money out of these market and thus exacerbating their decline. Here is a snapshot of these individual markets and possible investment options, if any:
- Russia: Too much of political risk and uncertainty. ING Russia fund LETRX can be used for a very high risk/return investment. Note: LETRX is available as no Load in Schwab brokerage.
- China & neighboring region: Best long term bet for growth and investment. Started from a low cost producer and exporter of myriad small and big items, now it is biggest financier of US treasuries. Investors like us can use FXI or MCHFX as a proxy to investment in china.
- India: Good bet for long term investment, burgeoning educated middle class and self sustained economy provide enough fodder for growth. However Infrastructure and lack of commom amenities can put a damper on growth. Investment vehicle for India: MINDX, IFN and PIN
- Latin America: Commodity driven economy, too cyclical in nature. Great for a trade via FLATX, PRLAX and few ADR's trading in US like PBR, AMX etc.
- Frontier Markets: I still don't call eastern Europe, Africa and middle east an emerging economy, they are frontier markets. Financial markets is still in nascent stage and offers little in terms of disclosure and account abilities. Hence it is better to avoid these markets all together or have no more than 2% of total portfolio. For 'us' retail investors, Fidelity - FEMEX and T Rowe Price - TRAMX offers some investment opportunities in these frontier markets.
Although emerging economies may be able to look forward to brighter opportunities and offer new areas of investment for foreign and developed economies, they need to consider the effects of an open economy on its citizens. Furthermore, investors need to determine the risks when considering investing into an Emerging markets.
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