ETF's For Goldman's Next-11
Goldman Sachs (NYSE: GS) is by now known for being the originator of the now famous “BRIC” acronym, which the bank coined back in a paper on the four fast-growing emerging markets back in 2003.
For those not in the know, Goldman has another kitschy phrase for another set of emerging markets that could rival the BRIC quartet in terms of economic growth in the 21st century, that being “N-11” or “Next Eleven.”
N-11's member countries are split between frontier and emerging markets status. Bangladesh, Nigeria and Vietnam are considered frontier markets in the FTSE market classification and those three along with Pakistan are classified as frontier markets by MSCI.
Egypt, Korea, Indonesia, Iran, Mexico, the Philippines, and Turkey are all considered emerging markets and there we have the N-11.
While Goldman notes the N-11 may not have BRIC-esque impact, the bank says “as a source of new demand and sustained growth, they could surpass major markets” and the group “could be an important source of growth and opportunity.”
With that, it pays to remember just because N-11 is a neat phrase, it doesn't mean you should sink your retirement account into Iranian and or Nigerian fare. Consider the following ETFs as trades on the emergence of the N-11 group.
1) Global X FTSE ASEAN 40 ETF (NYSE: ASEA): ASEA doesn't feature Vietnam exposure and its Philippines exposure is miniscule, but Indonesia is prominent among the ETF's country mix. In addition, the Philippines and Vietnam are members of the ASEAN group and the success of the group at large will weigh heavily on the ETF's long-term fortunes. ASEA might also be the preferred way to get indirect Vietnam exposure while passing on the always volatile Market Vectors Vietnam ETF (NYSE: VNM).
2) iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE): Taking into consideration geography and growth prospects, it's odd that EPHE still has the Philippines-specific market all to itself. EPHE like so many other emerging markets ETFs has struggled recently, but the ETF is one to watch for both short-term traders and long-term investors.
3) Market Vectors Indonesia ETF (NYSE: IDX): There are two Indonesia-specific ETFs, but IDX was the first to market and remains the dominant of the two funds in terms of assets under management. Although IDX has struggled recently, it is still up more than 20% from its February lows and if emerging markets ETFs come back into vogue in the second half of 2011, this ETF probably won't be a follower. It very well could be a leader as long as Indonesia keeps a grip on inflation.
4) IQ South Korea Small Cap ETF (NYSE: SKOR): Still a new ETF, SKOR's small-cap exposure might prove to be the better option for playing N-11 growth than the stodgy-by-comparison large-cap offerings found in the iShares MSCI South Korea Index Fund (NYSE: EWY). Even in a currently rough market environment, SKOR offers attractive risk-reward by entering in the $29.50 area with a stop-loss at $28 and a target of $33.
Others to consider: With Egypt in the N-11 fold, adventurous investors could take a look at the Market Vectors Egypt ETF (NYSE: EGPT), which has quietly been on a tear since May and should it return to its pre-political upheaval highs, that would mean about 25% upside from here. For slight Nigeria exposure, try the Market Vectors Africa Index ETF (NYSE: AFK).
Keep in mind in terms of Pakistan, Global X filed plans for a Pakistan-specific ETF last year, so that ETF could debut this year, though the firm cannot comment to that effect per SEC regulations.
Obviously, the iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW) and the iShares Turkey Investable Market Index Fund (NYSE: TUR) are among the top ways of getting exposure to those N-11 countries.
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