Assessing The Durability Of The Emerging Market Resurgence

Описание: With the MSCI Emerging Markets Index up 33.4 percent year-to-date, it's not surprising that some investors are wondering if they have missed the emerging markets party. Further stoking that debate is the emerging markets benchmark's 2016 gain of about 11 percent, meaning the index is approaching a two-year gain of almost 50 percent.

The good news is that fundamental factors bode well for developing world equities and the corresponding ETFs, such as the fast-growing iShares Core MSCI Emerging Markets ETF
IEMG
. China, the largest developing economy, looms large. China is by far IEMG's largest geographic exposure at 28.5 percent.

“The underlying fundamentals for EM equities are improving after five years of declining profitability and weak earnings growth,” said BlackRock in a recent note. “Much attention goes to China, but we see opportunities well beyond this EM powerhouse.”

Going Beyond China

This year, some of the more volatile emerging markets have been key contributors of developing world equity market returns. For example, the iShares MSCI Brazil Capped ETF
EWZ
is up more than 18 percent year-to-date while the iShares India 50 ETF
INDY
is higher by 30 percent. Politics are helping the case for stocks in both Brazil and India, historically two of the most volatile emerging markets.

“In Brazil, labor reform passed earlier this year gives companies more flexibility in managing their workforce, potentially leading to lower labor expenses,” said BlackRock. “Elsewhe