Market Overview

3 Emerging Markets Benefiting From Lower Oil

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3 Emerging Markets Benefiting From Lower Oil

The emerging markets have been out of favor the last few years as they have lagged returns in the United States. The iShares MSCI Emerging Markets Indx (ETF) (NYSE: EEM) lost 6 percent in 2014, underperforming the S&P 500 by nearly 20 percent.

Through the first three weeks of the year, EEM has gained 2.5 percent, easily beating the U.S. indices. This week, the ETF broke out to the highest level in six weeks as the U.S. market remains down for the year.

Related Link: Emerging Market Dividend ETFs Face Uphill Battle

The low oil prices have hurt some countries, while others that import a sizable portion of their energy may benefit. Three countries that stand to benefit greatly from low oil prices are Taiwan, India and Turkey.

Lower oil prices will allow these countries to reduce inflation as well as their account deficits. One aspect to note is that the lowering of inflation too much could be a negative. This week Turkey cut their interest rates due to that scenario; Turkey's inflation is currently at 8.2 percent.

Highlighted below is an ETF for each of the emerging market countries mentioned above.

Taiwan

The iShares MSCI Taiwan Index (ETF) (NYSE: EWT) is made up of 104 large- and mid-sized companies in Taiwan across nine sectors, with information technology at 59 percent and financials at 17 percent being the most heavily weighted sectors.

The top individual holdings include:

  • Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE: TSM) at 22.4 percent
  • Hon Hai Precision Industry Co., Ltd.-ADR (OTC: HNHPF) making up 7.2 percent
  • MediaTek Inc. coming in at 4.7 percent

EWT is up 10 percent over the last 12 months and up 2.3 percent in 2015. The ETF has an expense ratio of 0.62 percent.

India

The WisdomTree India Earnings Fund (ETF) (NYSE: EPI) consists of 232 Indian companies across 10 sectors, with financials at 28 percent and information technology at 17 percent being the most heavily weighted sectors.

Related Link: William Blair: India Is A Top Emerging Market Investment

The top holdings include:

The India ETF is up 41 percent over the last 12 months and 9 percent this year. EPI has an expense ratio of 0.83 percent.

Turkey

The Ishares Msci Turkey Inv Market Index Fd (NYSE: TUR) is comprised of 80 Turkish companies across nine sectors, with financials at 46 percent and industrials at 14 percent being the top weighted sectors.

The top individual holdings include:

TUR is up 30 percent over the last 12 months and has gained 6 percent in 2015. The ETF has an expense ratio of 0.62 percent.

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