Going Global Outside The Box

By Kevin Grewal

As the U.S. and most developed countries struggle to get out of the global recession, faster-growing emerging markets may be the answer to many questions.  When speaking of emerging international markets most automatically think of Brazil, Russia, India and China, the BRIC countries, but there are other opportunities to consider.

One such opportunity lies in Africa.  South Africa is known for its mining and production of precious metals and as long as the dollar remains weak and investors worry about inflation, precious metals will remain a hot commodity.  To further boost its appeal, South Africa’s government has implemented a spending restraint which has enabled its currency to remain relatively strong and its debt ratios favorable.  The easiest way to gain exposure to the nation is through the iShares MSCI South Africa Index ETF (EZA). 

Another opportunity lies in Eastern Europe in the emerging nation of Turkey.  Turkey is attractive because its consumer confidence levels are rising, it has a relatively young workforce, it boasts a thriving manufacturing sector and has an up and coming financial sector which is driven by an increase in consumer and business lending.  Additionally, the nation’s government is doing everything it can to meet all the requirements and be accepted by the European Union.  Gaining exposure to Turkey can be done through the iShares MSCI Turkey Invest Mkt Index (TUR).

Mexico has undergone a huge fiscal face lift which is drawing attention as well.  The emerging nation recently recorded a record foreign currency reserve and an investment grade debt rating.  Additionally, its ties to large U.S. companies, like Wal-Mart (WMT), bring down risk factors.  Mexico can be accessed through the iShares MSCI Mexico Investable Mkt Idx (EWW).

The last place to look is South Korea.  This Asian nation is attractive for many reasons.  First, it has heavy ties with China, so as China continues to remain a global economic powerhouse, South Korea will indirectly reap the benefits.  Secondly, the nation recently announced a trade agreement with the European Union and is in talk with the Obama Administration to form a similar agreement with the U.S.  Thirdly, South Korea has boasted a double digit growth rate in industrial production, a big part of the nation’s GDP.  Lastly, there doesn’t seem to be any employment issues in the nation, as it is near full employment.  The iShares MSCI South Korea (EWY) is a good way to play this market.  For those who want to gain leveraged exposure to South Korea, the Direxion Daily Emrg Mkts Bull 3x Shares (EDC) is a possibility in that it allocates nearly 7.6% of its assets to the nation.

A notable mention which will enable one exposure to some of these markets without a specific county-focus, adding a bit more diversification is the Dow Jones Emerging Markets Composite Titan Index Fund (EEG).  EEG gives exposure to South Africa and Mexico, in addition to the BRIC nations.  

Although these nations and ETFs show several signs of prosperity, keep in mind that they come with inherent risks, lack of liquidity being one of the biggest.  .   Implementing an exit strategy, like one found at www.SmartStops.net can help mitigate these risks.

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