Some Emerging Markets Primed for Higher Credit Ratings

Some Emerging Markets Primed for Higher Credit Ratings As the U.S., Japan and some developed Europe nations grapple with astronomically high debt-to-GDP ratios and less-than-perfect credit ratings, investors looking for sound fiscal positions might do well to consider emerging markets. From Latin America to the Middle East to Southeast Asia, there is no shortage of emerging markets with low debt-to-GDP ratios

. Sturdy balance sheets and improving credit ratings are two reasons

. That trend has benefited both dollar and non-dollar denominated fare as the dollare-denominated PowerShares Emerging Market Sovereign Debt ETF

is up almost nine percent year-to-date while the local currency WisdomTree Emerging Markets Local Debt ETF

has jumped nearly six percent. On the equities side, there are several ETFs poised to benefit if the countries these funds track receive higher credit ratings in the coming months. In some of the following examples, it is not a stretch to see ratings agencies taking positive near-term action.

Last year, Standard & Poor's and Moody's Investors Service both raised Colombia into investment grade territory. Colombia's economy is growing, though that growth is expected to taper off this year. The banking system there is fairly strong and the central bank is mulling its first rate cut since 2010 to bolster growth. S&P said earlier this year it does not expect to raise Colombia's rating this year and at least one analyst is not forecasting a ratings increase for South America's third-largest oil producer, either. "I don't think we will see Colombia's credit rating upgraded for sometime as there are still a number of structural problems to be dealt with but the ratings agencies will continue to hint at it as an incentive for the government as Colombian governments will basically follow the US lead economically and are strong exponents free trade, unimpeded capital markets, unregulated foreign investment and minimal regulation of the economy,"

so that might diminish the chances for more praise in 2012. As is the case with Colombia, that does not mean Peru is not deserving. The country's debt-to-GDP ratio is just 24.3 percent, ETFdb reported. There are other factors that could prompt ratings increases for Peru in the not-too-distant future. The economy is growing and

. If the risk on/materials trade comes back to life, EPU will be a prime beneficiary because Peru is the world's second-largest copper and silver producer and a major gold producer as well.

Just a few weeks ago

. That is the highest rating for the country since 2003. The move by S&P followed Moody's Investors Service raising its outlook to positive on the Philippines in May. These moves make sense as the Philippines is home to a debt/GDP ratio of 51 percent as of the end of the first quarter. Fitch might be compelled to follow suit and if the Philippines continues to be one of the brighter stars in Southeast Asia, a move to investment-grade status may not be far off. EPHE has been on of the strong emerging markets ETFs this year. In the past three months while the Vanguard MSCI Emerging Markets ETF

is off almost six percent, EPHE is higher by half a percent. For more on emerging markets ETFs and credit ratings, click

.