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Market Overview

How to Play CIVETS for the Rest of 2012 (VNM, EZA, TUR)


Since the dawn of BRIC, economists and banks have been working to come up with the next great emerging markets acronym and CIVETS seems to be one of the better ideas. Not even three years old, CIVETS, for those not in the know, is Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.

That's a diverse group with two members in emerging Asia, two in Africa, one in Latin America and one with exposure to Europe in the form of Turkey.

Beyond being a memorable acronym, these countries are viewed by some as the next BRIC and a few are already major economic players in their own right. Indonesia, South Africa and Turkey are members of the G20, a fact a lot of Westerners probably aren't aware of.

Fortunately, there's a country-specific ETF for each CIVETS nation and most of have been just wonderful to start 2012. With ten months left in the year, let's see how the CIVETS lineup stacks up via ETF. That's right, this list is in order of preference.

Market Vectors Vietnam ETF (NYSE: VNM) Yes, the Market Vectors Vietnam ETF is trading lower today, but give this ETF a break. It has simply been on fire this year, but even with that Vietnamese stocks still trade a reasonable multiples.

There are myriad ETFs that are impacted both ways by inflation news, maybe none more so than VNM. If Vietnamese inflation news is positive this year, VNM will continue its move higher.

Market Vectors Indonesia ETF (NYSE: IDX) There's no doubt about it: IDX has been a big disappointment this year. IDX is actually down year-to-date, but figuring out why is hard because alarming or negative headlines regarding Indonesia's economy have been scant this year.

Yes, IDX can keep lagging other emerging markets ETFs, but at some point astute investors will wake up to the fact that below $29, IDX is a steal.

Global X FTSE Colombia 20 ETF (NYSE: GXG) For this spot, it was nearly a coin flip between Colombia and Turkey, but we went with GXG for several reasons. First, it looks like Brazil is back and that has been and will continue to be a boon for other LatAm ETFs. Second, while Brazil helps an ETF like GXG, Turkey can be weighed down just being near Greece. Finally, Colombia and by virtue GXG, are commodities plays and that's not a bad thing these days.

iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) TUR has been an excellent performer this year and finding it this far down the list should be interpreted as a bearish view on the fund. There is room for upside with TUR, but the issues here are Turkey's low credit ratings and proximity to Europe's problem children, namely Greece.

iShares MSCI South Africa Index Fund (NYSE: EZA) The iShares MSCI South Africa Index Fund is another example of not being able to argue with the year-to-date returns. On the other hand, EZA's returns have been inline with those of some gold ETFs and have really lagged those offered by the ETFS Physical Platinum ETF (NYSE: PPLT), implying investors could be doing better with the commodities South Africa is known for over EZA.

South Africa's reported 2011 GDP growth of 3.1% today. That's not bad, but there are far better numbers in the emerging world. Not to mention, South Africa has an unemployment rate of almost 24%. Those issues to consider before running into EZA.

Market Vectors Egypt ETF (NYSE: EGPT) In putting the CIVETS ETFs in order of preference, the next easiest thing to do after placing VNM at the top was to put EGPT at the bottom. Again, this is a case where no one can argue with the performance. EGPT has been on an amazing run for several months now. Still, the ETF is vulnerable.

Economic issues such as an unemployment rate over 12% lead to political problems and with elections possibly being held in Egypt this year, any political violence would lead to repudiation of EGPT in short order.


Related Articles (EZA + EGPT)

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