China’s coronavirus scare rattled global markets, making stocks extremely volatile since last week. Having similarities to SARS, coronavirus has spread to other parts of the world, impacting travel demand materially. Not just travel, energy and material stocks, most sectors were dealt a heavy blow by the outbreak.
The number of confirmed cases of coronavirus has topped the 2003 SARS outbreak inside of mainland China, per CNN. As of Jan 29, there are 5,974 confirmed cases in China, including 132 dead, according to China's National Health Commission (NHC) (read: Don't Panic About Virus, Buy 5 Beaten-Down Top-Ranked ETFs).
Asian stocks, particularly trading in China, were hit the hardest. China fund Xtrackers Harvest CSI 300 China A-Shares ETF ASHR lost 8.3% in the past five trading days (as Jan 28, 2020) and iShares MSCI Emerging Markets ETF (NYSE:EEM) EEM was off 3.6%. SPDR S&P 500 ETF Trust (ASX:SPY) lost just 1.3% in the past five days (as of Jan 28, 2020).
Is This an Entry Point to Emerging Markets (EM) ETFs?
According to a senior technical analyst at Oppenheimer, emerging markets (EM) signal buying opportunity amid broad market declines.“The turnaround is still in play” and the brokerage house accordingly sees “this as a tactical opportunity.”
After all,the impact of coronavirus is likely to be short-term, no matter how big a shape it takes. Previously, SARS was estimated to have reduced GDP growth in East Asia by around ½ to 1 percentage point in 2003, per the Australian Government’s Treasury department. The economic disruption was relatively short-lived, with the worst impact noted in the June quarter of 2003. So, the event now is correcting the rich valuation of some asset classes.
Great policy easing cycle in several emerging economies, the signing of the phase-one U.S.-China trade deal, a dovish Fed and a moderate strength in the U.S. dollar make the case for emerging market investing stronger.
Emerging markets have long been investors’ choices owing to their high growth potential and rapid pace of industrialization. Investors should note that emerging market and developing economies are projected to have grown 3.7% in 2019, and are expected to expand 4.4% in 2020 and 4.6% in 2021, per IMF’s latest projection.
Along the bloc, Brazil’s economy has received one of the best projections from IMF for 2019 (expected growth is 1.2% from 1.3% in 2018). The IMF’s projections for EM growth was way stronger than developed economies. Across advanced economies, growth is projected by IMF at 1.6% in 2020-21 (read: Economic Slowdown in 2020? ETF Strategies to Help You).
Against this backdrop, we highlight a few emerging market ETFs that may show strength at the current level.
Emerging Markets Internet & Ecommerce ETF EMQQ
iShares Edge MSCI Min Vol Emerging Markets ETF EEMV
iShares MSCI Brazil ETF EWZ
iShares MSCI Russia ETFERUS
SPDR S&P Emerging Markets Small Cap (NYSE:EWX) ETF EWX
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Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ETF Research Reports
iShares MSCI Brazil ETF (EWZ): ETF Research Reports
iShares MSCI Emerging Markets
EMQQ The Emerging Markets Internet & Ecommerce ETF (EMQQ): ETF Research Reports
iShares MSCI Russia ETF (ERUS): ETF Research Reports
iShares Edge MSCI Min Vol Emerging Markets ETF (EEMV): ETF Research Reports
SPDR S&P 500 ETF (NYSE:SPY
SPDR S&P Emerging Markets (NYSE:SPEM
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Zacks Investment Research