Emerging Markets Funds & Emerging Markets etf

Many people still feel fear in investing in emerging markets, whether by emerging markets etfs or emerging markets funds and some people do ask how to invest in emerging markets indirectly.

The reason for investing in emerging markets is still compelling, as countries such as Brazil, China and India have moved out of the recent crisis more smoothly than America and western Europe and their economies are likley to continue to grow at a much faster rate than the West.

Companies in many emerging markets benefit from high consumption levels, acces to credit and expect both public and private investment.

So what is the route to invest in emerging markets indirectly.  Well one route is to invest in shares of multinational companies that are listed on western exchanges: these companies should be able to dodge the slow growth of their home economy by having high exposure to the faster growing economies of Asia, Africa or Latin America.

Apart from offering stability, these western multinationals also offer high liquidity compared to companies in emerging markets. Goldman Sachs has proposed an index of 50 companies of world-based developed firms exposed to the BRIC countries and these firms gained 16% over the last 3 years compared to a 20% loss for the MSCI World Index, according to Goldman Sachs.

Some of the FTSE 100 companies have hig exposure to emerging markets; Cairn energy has 100% exposure as has Lonmin.  Reckitt Benckiser, Rioi Tinto, Diageo, Unilever, Cadbury, British American Tobacco (BAT), Anglo American, SABMiller, XStrata, Tullow oil, to name but a few, have more than 30% exposure to emerging markets.

Banco Santander, based in Spain, has good exposure and profits throughout Latin America, and Portugal Telecom has strong operations in Angola and Brazil!

Exporters of products to emerging markets do well, of which Germany is a good example.

The challenge is to identify the really good deals and the best sectors are probably consumer durables (washing machines, fridges and the like) and consumer disposables (tissue paper, food).

Of course multinationals do nat have their own way in these markets as they face stiff competition from local companies.

You also need to make a distinction between good and bad emerging markets, eg Brazil, India China good, eastern European emerging markets bad. And the thing to remember is that this can and will change.