The Allure of Emerging Markets

03/09/2010 1:00 pm EST

Focus: ETFS

Jim Lowell

Partner & Chief Investment Officer, Adviser Investments

Jim Lowell, editor in chief of Forbes ETF Advisor, likes developing nations, except in Europe, and therefore prefers ETFs with an Asian and Latin American overweight.

With Greece and its debt woes making daily headlines, and with all the puns on the PIIGS (Portugal, Italy, Ireland, Greece and Spain) and their potential for global market contagion, you may be wondering what my take on staying the emerging markets course is.

Just as I remain chary of Europe's emerging market bourses, I remain wary of the risk and volatility that are part and parcel of staying any emerging market course.

My remedy for such wariness has been and remains a balanced, risk-adjusted course which has us holding to principles of emerging market equity diversification ( . historically using commodity and energy-focused commodity and metals positions, as well as regional and single country stakes).

As we move toward the muddy middle ground of the second and third quarters, it may be hard to find the conviction it could take to stick with our emerging market holdings. But, even if we see a dramatic pullback in emerging market stocks, we'll counterbalance that by a. its relative weighting in the overall portfolio; b. with our overall asset allocation, and c. with its counterweight in the bond space.

In fact, the latter will likely wind up paying us to be patient, something it has done since inception by means of delivering a reasonable yield as well as a total return benefit. [So,] let's review the emerging markets ETFs we do or could invest in, as well as my clear and distinct Buy, Sell, Hold recommendations.

BLDRS Emerging Markets 50 ADR (Nasdaq: ADRE) seeks investment results that correspond to the price and yield performance of the BNY Mellon Emerging Markets 50 ADR Index. The top country representations are Brazil (36.2%), China (11.1%), South Korea (10%), India (8.4%), and Hong Kong (7.6%). The top three sectors are energy (22%), materials (21%), and financials (19.8%). The top holdings [include] Vale SA (NYSE: Vale), Petrobras Petroleo Brasileiro (NYSE: PBR), Taiwan Semiconductor Manufacturing (NYSE: TSM), [and] China Mobile (NYSE: CHL). (ADRE closed Monday at around $47-Editor.)

Claymore/BNY BRIC (NYSE: EEB) seeks investment results that correspond to the price and yield performance of the Bank of New York Mellon BRIC Select ADR Index. The country representations are Brazil (56.9%), China (29.1%), India (11.1%), and Russia (3%). The top three sectors are energy (26.2%), financials (19.1%), and materials (18.7%). The top ten holdings [include Petrobras, Vale,] Infosys Technologies (Nasdaq: INFY), CNOOC (NYSE: CEO), and China Life Insurance (NYSE: LFC). (EEB closed Monday at just below $42-Editor.)

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