While prices were billed, the index fell to a two-year low on Monday, below 94.00.
The Index measures the value of the dollar against a basket of six currencies – some of the major US trading partners.
A volatile dollar usually affects returns on Emerging Markets (EM) shares, as its value is considered a proxy for risk appetite and affects financing costs and commodity prices. If everything else is equal, a weaker USD is beneficial for emerging market assets as it reduces debt service costs for international dollar borrowers. On the other hand, when the USD is robust, emerging economies pay high prices for imports from the US.
Equity markets in the United States have outperformed many international markets in the past decade, but with a potentially lower dollar in the offing, emerging markets are profiting. The emergence of middle-class consumers, one of the most important growth stories in the developing world, is further reinforced by the emergence of higher long-term EM returns.
However, not all emerging markets are created equal and higher profits are more at risk. Not to mention, the pandemic's health and economic uncertainties may offset some of the benefits of a weaker dollar for emerging equities. Investors should perform due diligence given their specific investment conditions. If risk tolerance permits, exchange-traded funds (ETFs) can add value to long-term portfolios.
Here are three EM ETFs to consider:
1. Vanguard FTSE Emerging Markets Index Fund ETF
Current price: $ 43.48
52-week range: $ 29.96-45.92
Dividend yield: 3.0%
Expense Ratio: 0.10% per year, or $ 10 on an investment of $ 10,000
Vanguard FTSE Emerging Markets Index Fund ETF (NYSE 🙂 follows the a measure of the return of shares issued by companies in emerging countries, such as China, Brazil, Taiwan, India, South Africa, etc.
VWO is well diversified with 5,225 companies. The five largest weighting sectors include Financials, Technology, Consumer Services, Industrials and Consumer Goods. In total, these sectors make up about 75% of the fund.
The top ten positions represent approximately 25% of total net assets, nearly $ 21 billion. VWO's top five companies are Alibaba (NYSE :), Tencent Holdings (OTC :), Taiwan Semiconductor Manufacturing (NYSE :), China Construction Bank (OTC :), and Naspers (OTC: )
Year-to-date (YTD), the fund fell by about 2.2%. However, since the lows of late March, pre-university education has risen about 50%, so some profitability can be seen. Long-term investors can find value in the fund around the $ 40 level or below.
2. iShares Core MSCI Emerging Markets ETF
Current price: $ 52.27
52-week range: $ 35.66-55.45
Dividend yield: 3.51%
Expense Ratio: 0.13% per year, or $ 13 on an investment of $ 10,000
iShares Core MSCI Emerging Markets ETF (NYSE 🙂 invests in 2476 large, mid and small cap companies. The five main weighting sectors are Financial Services, Information Technology, Luxury Consumer Goods, Communications and Materials. These sectors make up about 70% of the fund.
IEMG seeks investment results consistent with the price and yield performance of the MSCI Emerging Markets Investable Market Index . This benchmark measures large, mid and small cap stocks in global emerging markets. The fund is currently weighted by Asian economies.
The top ten holdings represent approximately 25% of total net assets, amounting to nearly $ 52 billion. The top five IEMG companies are Alibaba, Tencent Holdings, Taiwan Semiconductor Manufacturing, Samsung (KS 🙂 Electronics (OTC :), and Meituan Dianping (OTC :).
For the year, IEMG has fallen by 2.8%, but like VWO, it has risen rapidly since lows in late March, up more than 45% since early spring.
Long-term investors may consider buying into the ETF, especially if it falls below $ 50 or even near $ 45.
3. iShares MSCI India ETF
Current price: $ 32.45
52-week range: $ 20.48-36.18
Dividend Yield: 1.08%
Expense Ratio: 0.69% per year, or $ 69 on an $ 10,000 investment
iShares MSCI India ETF (NYSE 🙂 follows the which measures the performance companies whose market capitalization represents the top 85% of the Indian securities market, as calculated by the index provider.
The ETF invests in 86 Indian companies. The top five weighting sectors include Financials, Energy, Information Technology, Consumer Staples and Consumer Discretionary, which account for approximately 75% of the fund.
The top ten holdings comprise approximately 55% of total net assets – nearly $ 3.0 billion. The top five IEMG companies are Reliance Industries (NS :), Infosys (NYSE :), Housing Development Finance Corporation (NS :), Tata Consultancy Services (NS :), and ICICI Bank ( NYSE:
YTD, INDA has fallen by about 7.7%, but since March the fund has risen approximately 50%. over time, could pressurize the INDA to the level of $ 30 or even $ 27.5.