Emerging markets (EM) are gaining attention from capital markets as the likelihood of U.S. Federal Reserve rate cuts grows. With rate cuts on the horizon, traders are seeing new opportunities in the EM space, where profitable options abound.
According to Bloomberg, EM assets have recently seen an upward trend as traders began to anticipate a potential half-point interest rate cut by the Federal Reserve. This has sparked a surge in global risk appetite. Notably, the MSCI index tracking developing-world currencies rose by 0.5% on Friday, September 13, marking its seventh consecutive week of gains. This rise followed a two-week losing streak, highlighting the growing interest in these markets.
For those looking to capitalise on these developments, one potential opportunity is the Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC). However, it’s important to note that EM equities are often volatile, particularly due to fluctuations in the U.S. dollar. Traders who wish to hedge against downside risks can consider the Direxion Daily MSCI Emerging Markets Bear 3X ETF (EDZ). This fund provides inverse exposure to the EDC, allowing traders to profit whether EM equities rise or fall, offering flexibility in a dynamic market environment.
Beyond broad market exposure, traders have other options within the EM space for more targeted investments. Direxion, for example, provides country-specific and regional funds that open up additional possibilities.
China is one market of interest, especially for short-term traders. For those with a bullish outlook, the Direxion Daily FTSE China Bear 3X Shares (YANG) offers a way to capitalise on gains. This fund aims for daily returns that equal 300% of the inverse performance of the FTSE China 50 Index. Conversely, if China’s equities decline, traders can opt for the Daily FTSE China Bull 3X Shares (YINN), positioning themselves to benefit from falling prices.
India is another fast-growing economy presenting opportunities for traders. The Direxion Daily MSCI India Bull 2x ETF (INDL) seeks daily returns of 200% of the MSCI India Index, which tracks the performance of large- and mid-cap companies within India’s equity market. This index covers approximately 85% of India’s equity universe, providing significant exposure to the country’s economic expansion.
In Latin America, growth prospects are also strong, creating potential for investments in the Direxion Daily Latin America Bull 3X ETF (LBJ). This fund targets daily returns of 300% of the S&P Latin America 40 Index, which is composed of issuers from key Latin American markets, including Brazil, Chile, Colombia, Mexico, and Peru. The region’s growth trajectory offers traders further opportunities to benefit from emerging market trends.
As emerging markets continue to attract capital amid shifting U.S. interest rates, traders can explore a range of funds that provide both broad and specific market exposure. The flexibility of these financial instruments allows for strategic positioning, whether markets are on an upward or downward trend.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
