Emerging Markets, Frontier Markets, Funds / ETFs

How Latin America ETF’s Stand Against Global Emerging Markets (Alternative Technical Insight)

Emerging Markets are one of the most volatile and difficult asset classes to play. During the past three years the iShares MSCI Emerging Markets ETF (EEM) hardly delivered 10.25% which is not a lot if you take into account the amount of volatility related risk investors had to bear. Only since the recent August/September peak the EEM fell around 11.1%.

iShares MSCI EM ETF Performance – last 3 years
Source: StockCharts

Technically, the EEM remains in a strong negative trend. However with the latest positive momentum reading it has been fighting to consolidate at the level of around $40.6. It’s worth noting, that the 20 days moving average has already crossed the 200 days one. Also the 50 days moving average started sliding down. The bottom line is the trend followers will expect the EEM to continue trading south, however the contrarians might see this combination of technical measures as a good opportunity to gain exposure to global EM.

Those who love emerging market equities don’t need to stay glued to the boring EEM ETF. Instead, there is a whole range of thematic or country specific products which could serve as satellite positions around the core EEM. Those satellites, if you know how to play them, can significantly improve your performance risk adjusted profile.

Let’s look at the country specific Latin America etfs. Just for the purpose of this analysis, we will scrutinize the following countries:


  1. Mexico (EWW)
  2. Brazil (EWZ)
  3. Chile (ECH)
  4. Colombia (GXG)
  5. Peru (EPU)
  6. Argentina (ARGT)

Just to remind you that global emerging markets expressed as the EEM remain in a negative trend, however the short term momentum is positive. Those parameters combination is presented on the following graphic.

On absolute basis most of the Latin America ETF’s has followed the global EM pattern with exception of Brazil, as the EWZ etf reads both negative trend and momentum.

Those who invest in global EM should follow closer relative performance. As of October, 23rd both Mexico (EWW) and Brazil (EWZ) were remaining in negative both trend and momentum relative to global EM (EEM). On the other side of the coin there was Peru (EPU) with positive both trend and momentum relative to the EEM. Chile (ECH), Colombia (GXG) and Argentina (ARGT) had a mixed combination of the parameters (please refer to the above presented table on the right hand side).

That’s just a different angle or perspective of trying to deliver alpha to your portfolio. If you have any questions, please don’t hesitate to contact me via my Twitter account: @etfalpha.

Please familiarize yourself with our DISCLAIMERS every time you engage the site: they’re updated constantly without notice. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product. @etfalpha clients own shares of EEM at the moment of writing this article.

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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