Emerging markets awash in protests

Some ETF investors are worried that the unrest will cause economic damage.

By Benzinga Jun 19, 2013 3:10PM
copyright Emilie Duchesne, Vetta, Getty ImageBy The ETF Professor

In what is becoming something of a growing trend, developing world stocks and many of the ETFs that track them are cascading lower -- even on days when U.S. equities rally. The reasons are plentiful and the recent declines for an array of emerging markets are staggering.


Weak currencies, slowing growth, concerns about the end of quantitative easing here in the U.S., interest rate cuts that have yet to work, interest rate hikes that have proved equally futile among other factors have prompted severe punishment of emerging markets bonds, currencies and stocks.


That could change on Wednesday as the Federal Reserve signals the end of easing is not imminent, but that does not change domestic strife that is plaguing some emerging markets ETF, such as the following: 


iShares MSCI Turkey Investable Market Index Fund (TUR) The iShares MSCI Turkey Investable Market Index Fund has gained 1.6% in the past five days, but don't be deceived because the ETF is down 16% in the past month. Just weeks after TUR was boosted by news of Turkey's new investment-grade credit rating, the arcane and inept leadership of Prime Minister Recep Tayyip Erdogan is punishing TUR and the Turkey investment thesis (Benzinga).


With the specter of an Arab Spring type of revolution looming, investors are taking on significant risk for possibly no near-term reward with TUR. Do not expect things to ease up. Protesters want Erdogan gone. A fresh wave of demonstrations indicates as much.


Market Vectors Egypt ETF (EGPT) Speaking of the Arab Spring, although EGPT has recovered a bit, it continues to hover near prices not seen since the Arab Spring (Benzinga).


The easiest way of explaining things in Egypt is that one dictator has been exchanged for another in the form of current President Mohammed Morsi. Egypt is already dealing with protests, but the situation could become even more turbulent as massive protests are planned for June 30, the anniversary of the day Morsi ascended to power.


High unemployment, crumbling infrastructure and a precarious financial position in Egypt have Morsi opponents thinking June 30 could be their best (and last) chance to knock him from power, according to the Associated Press.


iShares MSCI Brazil Capped Index Fund (EWZ) Yes, things can get worse for Brazil ETFs and that comes as EWZ hit another 52-week low Tuesday. President Dilma Rousseff is popular, but it might only be a matter of time before "is" becomes "was" as Latin America's largest economy endured its worst protests in 20 years on Monday.


This is how fed up with things Brazilians are: In one of the most football-mad (global football, not U.S. football) nations in the world, citizens protested over, among other things, copious spending in advance of the 2014 World Cup when the funds would be better used for hospitals, schools and other necessities.


Market Vectors Indonesia Index ETF (IDX) Give credit where it is due because the Market Vectors Indonesia Index ETF and the rival iShares MSCI Indonesia Investable Market Index Fund (EIDO) have perked up in recent days. That does not mean investors should ignore protests over the government's effort to raise fuel prices in Southeast Asia's largest economy for the first time since 2008.


These protests involve Molotov cocktails and 19,000 armed military members and police (ABCnews). That is not a pleasant investing backdrop.


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