The iShares MSCI Mexico Capped ETF carries a 0.49 percent expense ratio and has generated a 15.6 percent annualized return over the past five years, according to Morningstar.
Market Vectors Vietnam ETF (VNM)
Though many emerging market economies have only begun to react to the various economic stresses of 2013, Vietnam has already taken its tough medicine. Several years ago, its economy was suffering from high inflation due to a poor national infrastructure.
Its banking sector also grew troubled, as unpaid loans piled up on bank balance sheets. In response, the government created the Vietnam Asset Management Co. to snap up those bad loans, and a now-healthier banking sector has begun lending again. Inflation has also come under control thanks to tough monetary policies.
Equally important: nearly two decades of persistent trade deficits are finally coming to an end. Though Vietnam ran a $1 billion trade deficit in the first half of 2013, it has run a roughly $1.5 billion trade surplus in the five months ended November 2013 thanks to surging exports as multi-nationals start to close higher-cost factories in China and re-open them in Vietnam.
As a result, investors have begun to focus on Vietnam, and shares of this ETF are up more than 8 percent in 2014. Still, the tough stretch the Vietnamese economy suffered from 2010 through 2012 has hurt this fund’s longer-term performance––it trades roughly 5 percent below its August 2009 offering price. The fund’s 0.76 percent expense ratio is a bit stiff, but Vietnam’s strengthening economic outlook should help investors tolerate that high expense load.
The emerging markets rebound will play out at a different pace for various countries. Some of the more poorly-performing stock markets still aren’t safe to buy, as investors await signs of more tangible reforms and a reversal of persistent trade deficits.
But other emerging markets such as Mexico, Vietnam, and a handful of countries in Asia have a much brighter economic outlook. These markets haven’t kept pace with the surging U.S. stock market in recent years, and as result, often sport more attractive valuations.