Go With International ETFs For Growth!

| September 21, 2010 | 0 Comments

You’ve probably noticed many of the world’s largest stock markets have recently stalled out.

Come to think of it, U.S., Canada, Europe, and Japan are still well off their April highs.  And even popular emerging markets like China, Brazil, and Russia continue to struggle.

Simply stated, it’s a tough market to find growth opportunities.

Fortunately for growth investors, some international markets are decoupling from developed markets.  They’re surging to new highs while the rest of the world is lagging behind.

And thanks to ETFs, investors can easily buy or sell these hot growth markets.  I’ll tell you more about a few international ETFs I like in a minute…

But first, let’s look at what’s driving growth in emerging markets.

Emerging markets are hot right now because of their higher economic growth rates.  When you look at the numbers, the results are jaw dropping.

Many emerging markets are growing GDP at a double digit clip.

For example, China grew at a 10.3% annual rate last quarter.  That’s awfully impressive compared to the 1% to 3% GDP growth US, Europe, and Japan are experiencing.

The other factor driving emerging markets higher is their low sovereign debt ratios.

The balance sheets of many emerging markets are quite strong.  Some of the best have debt to GDP ratios of less than 50%, while many developed markets like Japan and the U.S. are facing debt to GDP ratios of 100%.

The low debt to GDP ratio is helping emerging markets on two fronts.

First off, in an era where sovereign debt defaults are a real possibility, countries with low debt to GDP are considered safer.  In other words, they have a much lower default risk.  This is making it cheaper for governments in emerging markets to fund spending.

And that’s not all.

GDP growth in countries with low debt indicates their growth is real… it’s not being forced by aggressive credit!  This is in sharp contrast to many developed markets who are struggling to grow GDP by increasing debt levels.

In short, countries with low debt ratios will see continued GDP growth.  And that’s great news for the long term growth prospects of many emerging markets.

For these and many other reasons, investors are pouring money into international ETFs.  In fact, according to Morningstar, money inflows into international stock ETFs have led the pack over the last two months.

Here’s the bottom line… Emerging market ETFs should continue moving higher because of strong GDP growth and increasing investor interest.

Now, here are two ETFs you can use to take advantage of this opportunity.

The iShares MSCI Emerging Markets Index Fund (EEM) is one of the most popular emerging market ETFs.  It has amassed more than $43 billion in assets since launching in 2003.  It’s a great way to get access to a wide array of emerging market stocks.

EEM currently holds 681 stocks in more than 20 of the hottest emerging markets including China, Brazil, South Korea, South Africa, India, Russia, and Malaysia.

In just the last four months, EEM has shot up more than 23%.  And it should continue to leave developed markets in the dust.

If you want to be more focused, there are country specific ETFs as well. These ETFs give you the ability to drill down into specific countries and grab the best of the best.

One country flying high is Singapore.

According to Bloomberg, economists are expecting Singapore’s economy to grow at 14.9% this year.  That’s some serious growth any way you slice it…

The country is seeing surging exports.  And two new Vegas style casinos are growing tourism activity this year.

But here’s the real reason I think Singapore is a great investment…

They’re viewed as one of the most open economies for international trade and investment.  In fact, World Economic Forum ranked Singapore ahead of the U.S. in their yearly Global Competitiveness Report.

The way I look at it, capital tends to flow into the free markets… markets where the government isn’t picking the pocket of business owners.  And that’s a huge advantage for Singapore.

An easy way to get exposure to Singapore is the iShares MSCI Singapore Index Fund (EWS).  It holds 31 of the largest publicly traded companies in the country.

EWS has surged 24% over the last four months.  And with economic growth on the upswing, EWS should continue charging to new heights.

So don’t let weaknesses in developed markets get you down.  Growth in emerging markets is strong.  And now it’s easier than ever to buy and sell emerging market stocks with ETFs.

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Category: ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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