Market Overview

The Emerging Markets Triple P's Look Strong

The Emerging Markets Triple P's Look Strong

It has been duly noted that there is no dearth of global investment acronyms. Many of them are quite catchy, including BRICS, CASSH and MIST.

As BRICS has proven this year, not all investment acronyms lead to superior returns and some come with murky outlooks.

Investors searching for the right mix of near-term upside and outsized performance over the long haul may want to consider one letter: P. The triple P's are three emerging markets on three continents all starting with the letter P. Each offers investors a different investment thesis and each has the potential to deliver superior long-term returns.

Below are Triple P's ETFs listed in alphabetical order by country.

iShares MSCI All Peru Capped Index Fund (NYSE: EPU) On a year-to-date basis, the iShares MSCI All Peru Capped Index Fund ranks second in terms of performance among the major ETFs tracking South American countries, trailing only the Global X FTSE Colombia 20 ETF (NYSE: GXG).

EPU topped out just below $47 in April and has been trending lower since. It may appear that trying to scoop up EPU here is akin to catching a falling knife, but the near-term weakness is more the result of Peru's status as a major materials exporter.

Translation: Peru produces a lot of copper (gold and silver, too) and with industrial metals demand waning, EPU has languished. EPU's recent woes underscore the notion that investors may be forgetting that Peru will show the best GDP growth of any South American country this year.

Adding to the bull case for Peru is is relatively low political risk and an improving government balance sheet.

Investors that want some Peru exposure without going "all in" on the country should consider the Global X FTSE Andean 40 ETF (NYSE: AND), which offers combination exposure to Chile, Colombia and Peru. AND has risen nearly 10 percent this year.

iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE) Investors that take a myopic view of the iShares MSCI Philippines Investable Market Index Fund will see an ETF that has failed to impress over the past several days. What they are missing out on is a fund that has been a relative strength leader and one of the top-performing country funds in 2012.

EPHE's bullishness this year 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.

Moody's Investors Service and Standard & Poor's are both constructive on the Philippines. The former raised its outlook to positive on the Philippines in May. Last month, Standard & Poor's finally got around to raising the country's long-term foreign currency-denominated debt to BB+ from BB, the highest rating since 2003. The new rating is just one notch below investment grade and it is the same rating S&P has on Indonesia, Southeast Asia's largest economy.

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. Of course it cannot be forgotten that the Philippines may be debt free in just a few years.

Bond investors can gain some exposure to the Philippines with the PowerShares Emerging Markets Sovereign Debt ETF (NYSE: PCY) and the WisdomTree Asia Local Debt Fund (NYSE: ALD).

Market Vectors Poland ETF (NYSE: PLND) The Market Vectors Poland ETF is the only fund on this list with a direct rival, that being the iShares MSCI Poland Investable Index Fund (NYSE: EPOL). EPOL is slightly with an impressive 5.5 percent yield. In PLND's favor, it is less exposed to the financial services sector and features a slightly higher allocation to energy and materials names.

It is Poland's massive shale gas reserves that lend credibility to the Polish investment thesis.

There are more feathers in Poland's cap. The country is expected to show positive economic growth this year and that is not something to be taken lightly in Europe. Poland was the only European nation to enter a recession during the financial crisis. The country's economy is domestically-focused, not export-dependent, providing Poland with at least a little bit of cover from the Eurozone's sovereign debt crisis.

For more on emerging markets acronyms, click here.

Posted-In: Long Ideas News Bonds Short Ideas Specialty ETFs Emerging Market ETFs Commodities Global Best of Benzinga


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