Although the stock indexes in the United States took a shellacking in June, many stock markets of emerging economies registered strong gains during the month.
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The U.S. Market
The S&P 500 fell 5.4% in June 2010, as investors reacted to a perception that economic growth was slowing down in the United States, and possibly even across the global economy. Many stock markets located in emerging economies did much better during the quarter, with the best performers located in Asia.
The Thai market was up 5.2% in June, a surprising finish considering the recent political turmoil and street protests in the country. The economy of Thailand is still expected to grow by 6.5% in 2010, down from 7.5% due to a fall in tourism. Tourism accounts for about 6% of GDP according to analysts. Investors who want to invest in the Thai market can do so with the iShares MSCI Thailand Invest Mkt Index (NYSE:THD).
Indonesia was also up by 5.2%, and is up nearly 15% so far in 2010, making it the best performing emerging stock market this year. Analysts believe that money has flowed away from markets in north Asia due to concerns about reduced growth in that area. Indonesia also has only 10% of its GDP based on net exports, making the country a possible safe haven if the global economy slows.
Investors should be aware that the strong performance of the Indonesian market to date has increased the valuation, with the aggregate market now trading at 17 times 2010 earnings. The Market Vectors Indonesia ETF (NYSE:IDX) is a fairly liquid ETF that can be bought to play this market.
The Indian stock market finished up 4.6% in June, powered by an economy second only to China in growth. The economy record an 8.6% increase in GDP in the first quarter of 2010, with further growth expected in the second quarter.
The rally may be temporarily derailed by an unscheduled interest rate increase by the country's central bank, but most see any sell off as an opportunity to establish a position in the market. Investors that want to play the Indian market can invest in the India Fund (NYSE:IFN), a closed end fund managed by the Blackstone Group.
Playing the World
Investors that want exposure to all the emerging markets can dabble with the Vanguard Emerging Markets ETF (NYSE:VWO), which invests in many different emerging stock markets. This ETF does have a pronounced weight towards China, with 4 of the top 10 stocks from the Chinese market.
Investors fled the U.S. stock market in June 2010, driving the main index down by 5.4%. However, they haven't totally abandoned the risk trade as several emerging stock markets performed well during the month. (Learn more, see Going International.)
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