March 29, 2013

Investors Shunning Most Emerging Markets, but TIMPs Shine

As Q1 results start to roll in, some overseas markets are posting impressive equity market upticks

With Cyprus and Eurozone issues on their minds, investors moved out of emerging-markets equity funds over the past week, EPFR Global said Friday.

Emerging-markets equity funds experienced their biggest weekly redemptions since early September. Investors also ran away from emerging-Europe and Russia-focused equity holdings.

But, as AdvisorOne reported earlier this week, certain emerging-market, or EM, groups are gaining favor—at least with investment experts—thanks to their stellar returns.

As growth rates have, at times, slowed in recent years in Brazil, Russia, India and China—the so-called BRICs—other emerging markets are picking up steam. This has prompted Bob Turner, head of Turner Investments to call out Turkey, Indonesia, Mexico and the Philippines—the TIMPs—as the next group of high-flyers.

The TIMPs' performance in first quarter seems to support his argument.

While the iShares MSCI BRIC Index ETF (BKF) is down about 4% during the first three months of 2013, the U.S. market indexes have moved up 10%-13%. The Philippines and Indonesia, however, are topping the charts with increases of roughly 20% and 16.5% respectively—as measured by the iShares MSCI Philippines Investable Market Index ETF (EPHE) and the iShares MSCI Indonesia Investable Market Index ETF (EIDO).

Returns in Turkey and Mexico have not been too shabby, either. The iShares MSCI Turkey Investable Market ETF (TUR) is up about 8% as is the iShares MSCI Mexico ETF (EWW). (Stocks in Turkey rose 56% on average last year, according the Frank Holmes of U.S. Global Investors.)

Meanwhile, the BRIC counterparts are as follows: Brazil (EWZ) -2%, Russia (RSZ) -6%, India (INP) -3% and China (GXC) -4%.  

Still, investors appear to be jittery about emerging markets in general. Outflows from the Philippines equity funds saw their biggest weekly redemption since the financial crisis began, according to EPFR Global. (At the same time, China equity funds, which ended a 24-week run of inflows in mid-February, recorded outflows for the fifth straight week, the fund research group noted.)

Mexico and Mexico equity funds, however, “continue to stand out thanks to Mexico’s linkage to the U.S. economy and hopes that President Peña Nieto’s administration will push through some long-overdue structural reforms curbing major oligopolies and opening up key sectors to foreign investment,” said Cameron Brandt, director of research for EPFR Global, in a news release. “The $406 million they took in was the highest in over a decade.”

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Read Bye-Bye BRICs, Hello TIMPs on AdvisorOne.

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