When Emerging Markets Turn, One ETF Could Be Worth Watching

Emerging market exchange traded funds (ETFs) haven’t been anyone’s darling lately, but there will come a time when they make a turnaround, and it could wind up even being more robust than our own turnaround.

For exposure to emerging markets, why not look into PowerShares Emerging Markets Sovereign Debt Portfolio (PCY).It was launched last October, and has behaved according to the recent roll out of emerging markets.

Roger Nusbaum for The Street explains that PCY is dollar-denominated, so the greenback’s moves are not totally responsible for the decline; the price has pulled back because of the capital rotating out of emerging markets’ assets. Nusbaum describes PCY as doing very little, and then rolling over slightly in June. Price leadership should return once U.S. rates start to rise.

A closer look into PCY shows exposure to 22 countries from places such as Vietnam, Brazil, Turkey, Poland, Qatar and Uruguay. Venezuela is the riskiest holding, because if the country cancels its debt, the ETF would instantly lose  4.5%. The bonds held in the ETF are dollar-denominated so you won’t be exposed to small devaluations. 39% of holdings mature between 5-10 years, and another 39% matures within 20+ years.

PCY is down 5.6% year-to-date.

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