While CFPs and RIAs often select the best emerging market ETFs for their clients, these professionals may benefit from breaking out the mentality of viewing these countries as one complete entity. That's because emerging market ETFs often consist of organizations that compete against each other on a global scale, and therefore do not always reflect the economic climates of each individual country.
For example, recent reports indicate that many investors are positioning themselves for gains in larger emerging market ETFs such as the iShares MSCI Emerging Markets ETF (EEM), which keeps holdings in a number of companies in emerging market countries.
However, on February 2, a report in The Street highlighted one aspect of economic activity that their experts believe should be valued more highly by professionals who are hoping to position their clients for gains – a country's ability to ease its monetary policy. In particular, the news source cited a recent feature in The Economist, which formulated an index to calculate factors such as a country's currency exchange movement, current account balance, government and real interest rates, among others.
The goal of these metrics were to help investors better see which emerging market countries may be in the best position to encourage growth through proactive monetary policies, but according to experts this may only help those looking for short-term gains. One of the countries that was deemed by the report to have the "most room to ease" was Indonesia.
CFPs and RIAs may want to take note of the Market Vectors Indonesia ETF (IDX). The Street highlighted the fact that this particular ETF recorded more than 11 percent month-over-month growth in January. However, investors who choose to allocate funds toward this ETF may not be getting the most bang for their buck.
According to ETF Research Center, the market is currently adequately valuing the stocks in the fund resulting in a NEUTRAL rating, meaning investors may want to consider other emerging market ETFs with more attractive valuations.
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