Emerging markets(NYSEARCA:EEM) haven’t been able to catch a break in recent years.
by Samuel Taube
Many developing economies limped through the late 2010s, hobbled by a global breakdown in trading relationships, a sharp decline in Chinese demand for metals and other materials, and a massive oil(NYSEARCA:USO) glut.
Then, of course, the COVID-19 pandemic came and made matters even worse for these often-volatile markets.
Many developing countries struggle with inadequate health and sanitation infrastructure and largely informal or low-tech labor markets (populations that largely work in factories, on farms, or in other jobs that aren’t work-from-home eligible) — a recipe for economic devastation during a pandemic.
Yet several emerging market countries have managed, against all odds, to mount very effective responses to COVID-19. These countries have created a contrarian opportunity for investors who know where to look.
Today, we’re looking at which countries have had the best COVID-19 responses in the developing world, what they did right, and how you can profit from their success…
It might be surprising to hear that one of the best-faring emerging markets is a country that borders China, the place of origin of COVID-19. But Vietnam is handling the pandemic exceptionally well.
Less than 1,200 of Vietnam’s 95 million people have been infected — and less than 50 have died.
According to a YouGov poll, the country’s government has the highest COVID-19-handling approval rating in the world. Ninety-five percent of Vietnamese people approve of their government’s approach to containing COVID-19.
It wasted no time in shutting down airports, imposing mandatory quarantines for travelers, and launching a campaign of health and sanitation-related public service announcements — policies which helped the country reach a high level of preparedness for the virus as early as February.
What’s more, Vietnam enjoyed a healthy economic position before the pandemic — and there’s reason to believe it’ll bounce back. Gross domestic product (GDP) grew by an impressive 7% last year, and the country enjoys strong trading relationships with the U.S., EU, and China, meaning it should be relatively insulated from trade conflicts.
What’s more, Bloomberg’s Ho Chi Minh City Stock Index has a price-to-earnings (P/E) ratio of 14.61 — more than 25% cheaper than the S&P 500 on an earnings basis. The VanEck Vectors Vietnam ETF (NYSEARCA: VNM) provides exposure to these stocks.
Greece may be another unlikely beneficiary of the current crisis. It has spent most of the last decade in a state of financial ruin and is one of the only countries ever to be demoted from developed market status to emerging market status by indexing firm MSCI. But its lot has improved since the early 2010s, and it has handled COVID-19 impressively.
Its numbers at the time of writing — 12,452 cases and 297 deaths in a country of 10.2 million — aren’t quite as impressive as Vietnam’s, but they’re still far better than those of most of the world.
Greece’s government imposed strict lockdowns within weeks of its first recorded COVID-19 case in late February and devoted all of its limited resources to shoring up its health care system. Those efforts paid off.
What’s more, Greece’s economic recovery has delivered sizable gains to investors in recent years and should continue to do so once the country beats COVID. After all, the Athens Stock Exchange Composite Index is still down by a whopping 83% from its 2007 peak. And the country’s GDP is still down 25% from that year.
The Global X MSCI Greece ETF (NYSE: GREK) provides good exposure to this surprising comeback story.
Like Greece, Argentina is a country that has developed an unfortunate reputation for financial catastrophes in recent years, but it’s recovering strongly and tackling COVID-19 effectively in the process.
Its numbers — 524,000 cases and 10,900 deaths in a country of 45 million — are less impressive than the other two countries we’ve discussed here, but they’re still far better than America’s or Britain’s on a per-capita basis.
It owes its relative success to the quick action of its government, which closed its borders and imposed a nationwide quarantine within days of its first recorded case on March 3.
And its stock market is among the most oversold in the world. Its main index lost half its value last summer after the upset presidential election victory of populist Alberto Fernandez over market-friendly incumbent Mauricio Macri. It has stabilized since then but is still more than 15% below its 2019 peak.
The Global X MSCI Argentina ETF (NYSE: ARGT) provides an easy way to buy Argentinian equities.
As you can see, national wealth does not correlate perfectly with an effective COVID-19 response.
All three economies we’ve profiled today are significantly poorer than the G7 countries. Logically, they should have been wallopped by the pandemic, but they’re all doing better than the U.S. by most metrics.
It all goes to show that value can be found in unexpected places — especially when you’re searching worldwide. Bull and Bust Report editors Luke Burgess and Christian DeHaemer know this.
Their subscribers have been profiting handsomely from two emerging market ETFs in recent months — one of which is up more than 120% since its recommendation last summer. Click here to learn more.