Market Overview

3 ETFs for Countries With Solid PMI Data

When investing in a country-specific ETF, be it one that tracks a developing or emerging economy, it is often safer to bet one those countries with rising economic growth. Gross domestic product (GDP) is one number that can investors assess the strength of a country's economy. Another is the purchasing managers index, or PMI.

PMI data is easy to interpret. A reading above 50 is considered bullish while a reading below 50 indicates contraction. In August, global PMI ticked higher to 48.4 from 48.1 in August, but the sub-50 reading could be an ominous sign for economies the world over.

Two sluggish months on the international PMI front may also imply that finding August readings above 50 is hard. That might be the case, but those readings are out there and investors can use these ETFs to tap into some of the better PMI readings in the most recent batch.

iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR)

Turkey's August PMI will not knock anyone's socks off, but a reading right at 50 is certainly less bad than what many other countries showed. The August number also topped July's reading of 49.4, according to Markit data.

A decrease in new orders for the third time in four months shows Turkey is far from immune from a global slowdown. However, there is still a lot to like about the Turkish economy, including favorable demographics and a declining debt-to-GDP ratio. TUR has gained almost 41 percent year-to-date and is just 1.6 percent below a new 52-week high.

Market Vectors Indonesia ETF (NYSE: IDX)

Indonesia's PMI came in at 51.6 last month, up from 51.4 in July. That increase may not sound like much, but it was enough to push Southeast Asia's largest economy to its best PMI reading in 10 months.

"New order growth was recorded for the third month running in August. Panellists commented on solid market demand and increased numbers of customers as factors supporting the rise in new work. Data suggested that domestic demand was the principal support to new order growth, as export sales decreased slightly," according to Markit.

The Market Vectors Indonesia Index ETF, the largest ETF tracking the world's fourth most populous nation, got off to a sluggish start this year, but since mid-June the fund has gained about 10 percent. Support can be found at $27 while a move above $29 could confirm a breakout.

iShares MSCI Ireland Capped Investable Market Index Fund (NYSE: EIRL)

It was not that long ago that Ireland was viewed as one of the PIIGS problem children, but the country appears to be on a quicker path to economic recovery than Greece, Italy or Spain. Ireland's August PMI jumped to 51.7 from 49.1 in July. That was the first increase in four months. Bullish sentiment regarding Ireland's economy and European equities in general have lifted EIRL in recent months. Over the past 90 days, the ETF has soared 10.3 percent.

Risks remain, however. Ireland's input cost inflation rose at its fastest pace since March 2011 in August, Markit said. Ireland is working through a $86.5 billion bailout program, which the International Monetary Fund said the country is making decent progress on. However, the IMF also cautioned low growth and the wider euro-zone debt crisis could hamper Ireland's hopes of emerging from that program, The Wall Street Journal reported.

While EIRL has been performing well lately, the ETF is still small with just under $8.8 million in assets under management. With a P/E ratio of almost 18.2, the fund is more richly valued than emerging markets ETFs such as the iShares MSCI Emerging Markets Index Fund.

For more on ETFs, click here.

Posted-In: Long Ideas News Short Ideas Specialty ETFs Emerging Market ETFs Global Econ #s Economics Best of Benzinga

 

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