Six ETFs Hoping to Avoid Emerging Market Hyperinflation

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Inflation is often crippling in economies, but so-called hyperinflation is far worse. 24/7 Wall St. recently identified 11 key emerging market nations suffering serious inflation. In most cases this is not technically hyperinflation. Hyperinflation is just one of those real risks to most emerging market nations. Note though that hyperinflation is defined differently by different economists. Those suffering from double-digit price gains in food and energy likely would disagree handily with formal economist definitions.

The good news is that some of the emerging market panic of the summer is abating. The bad news is that much of the gain seems tied to promises made long before a real economic recovery can be declared or is evidenced in the economic reports.

We decided to take a look at six emerging market exchange-traded funds (ETFs), five of which are very nation specific, where the recent share price recovery may signal that the worst has passed.

The emerging markets are still in a state of flux, and it would be negligent not to point out that these recoveries do not come without risk. As noted, many of the improvements seem to be based on trading bounces and on future promises rather than on true a recovery as seen in the actual economic reports.

Of our 11 nations under focus, we focused on the actively traded and country-specific ETFs by and large. These nations have suffered from the effects of inflation, and their economic growth is coming at rates that are in all cases well under each local economy’s potential.

iShares MSCI Emerging Markets (NYSEMKT: EEM) is the king of emerging market ETFs, and it is up another 1% on Monday to $40.45, against a 52-week range of $36.16 to $45.33. Keep in mind that this key emerging markets ETF was less than $37.50 at the end of August. This one screens out as dominated by China, Hong Kong and South Korea, but the reality is that it has exposure to all parts of the emerging market economic world. We generally feel that this ETF is too broad to measure any one or group of very specific economies. That being said, we also have to concede that the largest institutional investors and retail investors use this ETF as the benchmark for emerging market exposure. Its average daily volume of 72 million shares, worth nearly 43 billion in daily volume, speaks for itself.