3 ETFs For Countries With Solid GDP Rates
These days, it is not hard to find developed and emerging economies that are disappointing on the economic data front. Two GDP reports released this week indicate as much. The Commerce Department's revision to U.S. second-quarter GDP showed growth of 1.7 percent. That is better than the initial estimate of growth of 1.5 percent, but hardly awe-inspiring.
India, once one of the shining economic stars of the emerging world, said its second-quarter GDP increased 5.5 percent. That is barely better than first-quarter growth of 5.3 percent, which was one of the country's worst growth numbers in years.
From Brazil to China to the Eurozone, finding GDP numbers that are not major disappointments has become a trying task. The good news is that it is not impossible. Investors can use the following ETFs to cozy up to countries that showing rising GDP growth.
iShares MSCI All Peru Capped Index Fund (NYSE: EPU) Peru delivered a pleasant surprise to investors earlier this week with a second-quarter GDP report showing growth of 7.4 percent. That is up from first-quarter growth of seven percent.
There is a "behind the numbers" scenario with Peru that investors should acknowledge. As a major producer of copper, gold and silver, Peru is viewed as raw materials play and that is evident in EPU's almost 53 percent to materials equities. Translation: It bodes well for Peru's economy and EPU's upside that second-quarter GDP surged at a time when China is slowing copper purchases and the materials trade is tenuous at best.
With EPU trading at price-to-earnings ratio that is below that of the broader emerging markets universe, investors would do well to consider this fund as a way of gaining exposure to bullish GDP trends.
iShares MSCI Philippines Investable Market Index Fund The Philippines reported GDP growth of 5.9 percent in the second quarter topping the consensus estimate of an increase of 5.5 percent. If there is a cautionary tale it is that the country's GDP growth was 6.3 percent in the first quarter.
EPHE has been one of the best country-specific funds year-to-date and the fund's performance has helped call attention to the long-term potential of the Philippines. GDP growth is expected to be 4.2 percent this year and five percent in 2013, according to World Bank forecasts.
The biggest risk to further near-term upside for EPHE is obvious. If China continues to keep skittish investors away from Asia-Pacific ETFs, EPHE becomes vulnerable to some downside.
Global X Norway ETF (NYSE: NORW) Norway is a developed market, so GDP growth in this Nordic nation is not going to resemble that of Peru or the Philippines, but those comparisons are not fair. Still, Norway is showing a solid growth trajectory, especially compared to Eurozone countries. Norway's GDP expanded by 1.0 percent in the second quarter from the first, for an annual growth rate of 5 percent, up from 4.6 percent in the first quarter, according to Central Bank News.
Norway's status as a major oil exporter is a double-edged sword. Predictably, this is a good thing when oil prices rise and an albatross when crude prices falter. However, Norway offers investors a stronger government balance sheet, better growth and less risk than the Eurozone all with the backstop of a $600 billion sovereign wealth fund that could be used to stimulate the domestic economy if needed.
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