As the financial markets in the U.S. continue to look overextended, some investors are starting to consider reallocating gains and spreading their investments around to other markets. The group known as the frontier markets, which are the less advanced capital markets in developing regions are starting to get attention due to their rapid growth profiles and underlying demographics. In the article below we’ll take a look at three charts that are suggesting that now could be the ideal time to increase exposure to countries such as Argentina and Vietnam.
Invesco Frontier Markets ETF
For investors looking to add exposure to frontier markets, a natural choice could be an exchange-traded fund such as the Invesco Frontier Markets ETF (FRN). With 71 holdings from countries such as Argentina, Kuwait, Nigeria, Morocco, Romania, Kenya, Vietnam and Panama, the FRN ETF is one of the most popular among active traders. As you can see from the chart below, the price has recently risen above the resistance of its 200-day moving average (red line). The breakout acted as a catalyst for a sustained move higher, which has also resulted in a bullish crossover between the 50-day and 200-day moving averages (shown by the blue circle), which is one of the most common long-term buy signals used by followers of technical analysis. Based on the chart, active traders will likely set stop-loss orders below $13.15 in case of a sudden shift in sentiment.
Global X MSCI Argentina ETF
Those who are interested in adding exposure to Argentina, which is a top region based on weighting of the FRN ETF, one option that could be worth a closer look is the Global X MSCI Argentina ETF (ARGT). As you can see from the chart below, an ascending triangle has formed and traders will be keeping a close eye on the resistance near $29 over the coming days to see if the price is able to break higher. A close above the trendline would likely act as a catalyst for a move higher and could lead to a short-term surge in momentum. From the perspective of many traders, it would have been ideal for the price of the fund to have been fully contained within the pattern during the formation phase. But the brief period where it slipped below seems to have been insignificant and the trend seems to be continuing its upward trajectory. Buy-stop orders will most likely be placed slightly above the upper trendline and a breakout would likely lead to target prices being set near $33, which is equal to the height of the pattern plus the entry price.
VanEck Vectors Vietnam ETF
Another interesting frontier market that could be worth a closer look belongs to Vietnam. For followers of ETFs, a popular choice is the VanEck Vectors Vietnam ETF (VNM). As you can see below, the price is trading within a defined range and the bounce off the 200-day moving average suggests that the bulls are currently in control of the momentum. Traders will watch for a breakout above the resistance near $17.25 and set stop-loss orders below $16.02 in case of a significant change in fundamentals.
The Bottom Line
Frontier markets such as Argentina and Vietnam are often overlooked by North American investors in favor of domestic investments. However, based on the charts shown above, it could be an interesting time to diversify one’s portfolio outside of North America and add some exposure to the up-and-coming nations known as frontier markets.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.