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Three of 2012’s Most Disappointing EM ETFs

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Broadly speaking, 2012 has been a good year for emerging markets ETFs. Diversified funds such as the iShares MSCI Emerging Markets Indx (NYSEARCA:EEM), the iShares Inc. (NYSEARCA:EEMV) and the WisdomTree Emerging Markets Eqty Incm Fd (NYSEARCA:DEM) have delivered solid returns.

At the country level, ETFs tracking developing nations ranging from Colombia to Mexico to the Philippines to Thailand to Poland and scores of others have impressed as well.

iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB)

That all sounds good, but it does not mean all emerging markets ETFs have delivered for investors in 2012. Some have been downright disappointments, including marquee emerging markets ETFs such as the iShares MSCI Brazil Index (NYSEARCA:EWZ).

To be sure, disappointment comes in a variety of forms and iShares MSCI Brazil Index (NYSEARCA:EWZ) has been not the only emerging markets ETF turkey this year. Some of the following funds have been just equally, if not more, disappointing.

Market Vectors Vietnam (NYSEARCA:VNM) Looking at VNM’s year-to-date gain of 16.7 percent could make the ETF’s inclusion on this list confusing to the untrained eye. However, a quick glance at Market Vectors Vietnam (NYSEARCA:VNM)’s chart shows the bulk of the ETF’s gains were accrued in the first quarter and after the fund failed to run much past $21 in May, the ensuing tumble was disheartening.

Coming off a 2011 when Vietnamese stocks were hammered by rampant inflation and currency devaluations, it looked like VNM finally had its act together early this year. That theory would be dispelled. In the third quarter came news of the arrest of two noteworthy Vietnamese banking scions, headlines that dealt a blow to investor confidence in Vietnamese banks.

Investors were harshly reminded this is a corrupt country and headlines about a banking sector awash in bad loans did not help. In other words, Vietnam squandered a great opportunity for itself and Market Vectors Vietnam (NYSEARCA:VNM) this year.

The good news is VNM has shown signs of life in recent weeks. The fund, which tracks a market that is cheap relative to the broader emerging markets universe, has surged 7.7 percent in the past month. Remember, it was in the late fourth quarter of 2011 that Market Vectors Vietnam (NYSEARCA:VNM) started perking up before surging in the early part of the new year. Perhaps a sequel is in store.

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