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Monday, February 17, 2025

Emerging Markets on the Rise: Which ETFs Should You Buy Now?

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Emerging Markets Offer Growth Potential: Expert Highlights Four Key Markets and ETFs

Investors are increasingly looking towards emerging markets for potential growth opportunities, and a senior portfolio manager at Mirae Asset, Malcolm Dorson, believes they offer "significant domestic consumption stories and long-term opportunities." Dorson, who manages a portfolio of over $600 billion, highlights four markets and specific exchange-traded funds (ETFs) that he believes are poised for success.

Key Takeaways:

  • Emerging markets offer significant growth potential. With over 4 billion people and discounted valuations, they represent an attractive investment opportunity.
  • India is a top market to watch. Dorson cites its strong structural story, recommending the Global X India Active ETF (NDIA-US).
  • Brazil remains inexpensive, offering upside potential. Dorson favors the Global X Brazil Active ETF (BRAZ-US), which focuses on growth at a reasonable price.
  • Argentina is on the verge of economic revival. The Global X MSCI Argentina ETF (ARGT-US) invests in the country’s largest and most liquid securities.
  • Greece offers value-oriented opportunities. Dorson highlights the Global X MSCI Greece ETF (GREK-US), with Greek banks trading at discounted valuations.

India: A Structural Growth Story

India is a top market on Dorson’s radar, citing its "best structural story" in emerging markets. He believes it is a market "to pay the tuitions of my children and grandchildren." The Global X India Active ETF (NDIA-US), which holds 30 shares including companies like Infosys, Reliance Industries, and Tata Consultancy, is a key investment option for Dorson.

While the ETF has returned around 12% so far this year, it has underperformed its benchmark MSCI India Investable Market Index, which has gained 18.7%. However, Dorson remains optimistic about India’s long-term growth prospects.

Brazil: Inexpensive and Potential for Upside

Dorson views Brazil as an "interesting" market due to its current "inexpensive" valuations. While the country recently paused its interest rate-cutting cycle, more cuts could be implemented if the U.S. Federal Reserve follows suit.

Dorson highlights the historical trend of Brazilian equities rallying by 5% for every 1% weakening of the Brazilian Real against the U.S. Dollar. He is investing in Brazil through the Global X Brazil Active ETF (BRAZ-US), which focuses on growth at a reasonable price. The ETF has, however, declined by 15.2% year-to-date, underperforming its benchmark MSCI Brazil IMI index, which is down 16.1%.

Argentina: Economic Revival and Investment Incentives

Dorson is bullish on Argentina, suggesting it is poised for an economic revival. He believes President Javier Milei’s economic plans, which aim to cut subsidies, costs, and raise taxes, despite potentially slowing the economy, are necessary for the country’s long-term growth.

Dorson points to the country’s growing economy, falling inflation figures, and fiscal surpluses as evidence of positive trends. He favors the Global X MSCI Argentina ETF (ARGT-US), which invests in the country’s "largest and most liquid securities." The ETF has generated 13.6% returns year-to-date, while its benchmark MSCI Argentina IMI has logged 29.1% gains.

Greece: Value-Oriented Opportunities

Greece presents a "value-oriented opportunity" in Dorson’s view, with its "strong margin of safety from a valuation perspective." He emphasizes that Greek banks are trading at 0.6 times book value, and the entire Greek market is trading at 0.9 times book value. This significant discount makes Greece attractive for value investors.

Greece’s credit rating has been upgraded recently by S&P, Fitch Ratings, and Moody’s, indicating positive trends. Dorson anticipates a further upgrade to "developed market" status within the next two years.

The country’s economy has rebounded from a prolonged debt crisis and is projected to grow by nearly 3% this year, outpacing the euro zone average. Dorson is investing in Greece through the Global X MSCI Greece ETF (GREK-US), which has returned around 16.12% this year, surpassing its benchmark MSCI Greek IMI by 0.42%.

Investing in Emerging Markets: Considerations and Potential Risks

While emerging markets offer immense growth potential, investors should be aware of the inherent risks associated with these investments:

  • ** Volatility**: Emerging markets tend to be more volatile than developed markets due to factors such as political instability, economic fluctuations, and currency volatility.
  • ** Regulatory Risks**: Regulations can be less transparent and more subject to change in emerging markets compared to developed markets.
  • ** Liquidity Risks**: Investing in certain emerging markets can be challenging due to limited liquidity, especially for smaller companies.
  • ** Political Instability**: Geopolitical risks and political instability can significantly impact the performance of emerging markets.

It’s essential to conduct thorough research, diversify investments, and carefully assess individual investment goals before investing in emerging markets. Seeking advice from a qualified financial advisor can be beneficial in navigating the complexities of these markets.

Article Reference

Sarah Thompson
Sarah Thompson
Sarah Thompson is a seasoned journalist with over a decade of experience in breaking news and current affairs.

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