Emerging Economies Look Good After Greek Decision

Brittney Barrett  |

Emerging markets have been the talk of the town this year, with China taking over Japan as the second largest economy and India’s growing job market and populations. These economies have not yet reached the peak on the parabola and there remains continual space for growth. The latest development in Greece, the nation’s acceptance of on-going austerity measures will help further that growth, adding optimism to the global landscape.

The fact that Greece will now eliminate the immediate threat of defaulting on their debt is a huge weight lifted off the remainder of the world, helping to buoy economies in the short term and quiet suspicion of a global slowdown. That said, now after weeks of losses, global equity markets are climbing back from recent lows making it a good time to consider investing in the ETFs of global economies. Among evidence that the slide is coming to an end, the New Zealand dollar reached a new post-float record against its U.S. counterpart following the announcement from Greece exhibiting a returned zeal for risk on the international market.

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Inflation appears to be limited to small pockets of the economy, boosting investor interest in emerging currencies and companies. There is an impression that while the U.S. and Europe are bogged down by debt ceilings, social programs, defaulting and euro/dollar crash, investing in an emerging economy can offer more safety. China is getting bigger, so are India and Brazil. This simple fact presents a demographic reality that these currencies and raw materials will naturally gain strength alongside the broader economy and growing population.

The lack of dueling currencies, falling against one another, like the euro versus the dollar also makes these smaller companies safer, especially now without the risk of global worry over the Greek decline. As a short-term investment, in the aftermath of the Greek scare, many of them could get a considerable boost.

At the top of the list of potential beneficiaries is Brazil, whose corresponding ETF  iShares MSCI Brazil (EWZ) has corrected considerably, around 10 percent from its peak this year and stands beneath its 50-day and 200-day moving average. Brazil; however, mineral rich and full of mining opportunities could be in for a continued rise as the globe shakes off the threat of the global crisis.

Another great option is China’s ETF SPDR S&P (GXC) which seeks to replicate the total return performance of the S&P/Citigroup BMI China Index, The Index is a market capitalization-weighted index that defines and measures the investable universe of publicly traded companies domiciled in China, but legally available to foreign investors. Already today, the index is up 1.6 percent and will likely continue to climb as confidence on global growth solidifies. China's economy continues to boom and while investing in many of the nation's internet start-ups has proved to be a bust the immense growth within the nation and the material required to help account for massive urbanization should drive the index higher in coming years.


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