Comments about substantially stretched stock valuations from Janet Yellen on July 21, 2014 spooked the market and sent prices of the major U.S. indexes lower. When volatility in the U.S. market increases, it is often a natural reaction to look at pulling money out of U.S. equities. In many cases, traders reactively put their money to work in other areas of the world that experience better-than-average growth, like emerging markets. For this reason, we’ve chosen to take a look at the Vanguard Emerging Markets VIPERS (VWO). As the name suggests, this ETF seeks to track the performance of a basket of companies that are located in emerging market countries. Taking a look at the chart below, you’ll find that this ETF has risen more than 7% over the past three months and it is currently trading near its 52-week high. (For more, check out Should You Invest In Emerging Markets?)

we’ve chosen to take a look at the Vanguard Emerging Markets VIPERS (VWO).

Looking at Components

For traders who want to diversify their holdings outside of the U.S., it is a good idea to check out the components of VWO for interesting picks. The top holdings of the fund are shown in the table below and these choices make ideal selections for traders looking to trade the emerging markets.

Company (Ticker)

Weighting (%)

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)


Tencent Holdings Ltd. (TCTZF)


Petroleo Brasileiro SA


China Construction Bank Corporation (CICHY)


China Mobile Ltd. (CHL)


Looking To Semiconductors For Growth

As the internet of things continues to take hold, semiconductors continue to play an ever increasing role in our everyday lives. The long-term growth prospects for this sector are very lucrative and there are few companies with the cost structure of TSM. For those of you who don’t know, TSM is engaged in manufacturing, selling and packaging integrated circuits and many types of semiconductor devices on a very large scale. As you can see from the chart, the stock has had an amazing run over the past five years with gains of more than 100 percent. Recent weakness is being looked at by many traders as a reversion to the mean and could be an ideal time for long-term traders to take a position. You’ll see that the price has historically been able to find support near the 200-day moving average, but it hasn’t bounced off this level as nicely as many of its large-cap U.S. counter parts. Stop-loss orders should be set below the 200-day moving average, but some room should be given due to the emerging markets' nature of inherent volatility. (For more, see Semiconductors Conduct A Comeback)

TSM is engaged in manufacturing, selling and packaging integrated circuits and many types of semiconductor devices on a very large scale.

The Bottom Line

With recent comments on stretched stock valuations by Janet Yellen, it is a natural reaction for active traders to look overseas for growth. In many cases, checking out the components of major emerging markets ETFs such as the Vanguard Emerging Markets VIPERS can provide valuable insights for those looking to develop a watch list. As discussed above, you’ll find that Taiwan Semiconductor Manufacturing Co. Ltd.(TSM) had a tremendous run over the past five years. Generally speaking, it is very uncommon to see companies with market caps of more than $50 billion double in value over five years. Luckily for TSM investors, there aren't major technical signals showing this trend will reverse any time soon. (For more, check out The Advantage Of Intermarket Analysis)

Related Articles
  1. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  2. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  3. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  7. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  8. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Investing

    What's Better Facebook Moments or Google Photos ?

    Facebook and Google have both released new cloud-based photo sharing services. How good are they?
  1. Is Malaysia a developed country?

    Despite undergoing rapid economic development over the past five decades, Malaysia is not considered a developed country, ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>

You May Also Like

Trading Center