4 EM ETFs in Trouble Now (HAO, EGPT, VWO)

Some high beta stocks with ties to the emerging markets growth story are being taken to the woodshed today, we're talking about you BHP Billiton BHP, on concerns that China's economy is slowing. A familiar refrain that investors have had to contend with in 2012 and it serves as a stark reminder that investing in emerging markets stocks and ETFs is not for the faint of heart. At first glance, the year-to-date statistics for many emerging markets ETFs look good. Some even look excellent. At the start of trading today, the Vanguard MSCI Emerging Markets ETF VWO was up 16% since the start of the year and there are scores of country funds from Brazil to Russia that are up more than that. That's the good news. The bad news is that since late February, more than a few emerging markets ETFs have started to show signs of having some cracks and those small cracks could be forecasting bigger declines to come. These five are particularly vulnerable to what could be double-digit medium-term declines. Market Vectors Egypt Index ETF EGPT We're not going to toot our own here, but EGPT is down significantly since we highlighted the fund as vulnerable. Some pundits have even said that Egypt is tough to invest in because the country doesn't report a GDP number, though those statements after our initial call regarding EGPT's imminent tumble. Here's the bottom line: One need not have gone to Yale to realize Egypt is not the most politically stable country in the world and that when an ETF like EGPT surges almost 40% to start the year, smart traders are going to consider this fund overbought and start taking profits. A decline of another 10% would take EGPT below $12, though the ETF could find support just above that area. Guggenheim China Small Cap ETF HAO The Guggenheim China Small Cap is one of those ETFs that's made for the times when investors are tripping over themselves to get involved with China. That was the case to start the year as HAO made a couple of attempts to crack through resistance around $24 but failed. Now the issue is how bad things would be for this ETF if it did fall another 10%. From current levels, that would take the ETF down to $20, but remember, HAO was near $24 just a few weeks ago. A drop below $20 probably isn't in the cards anytime soon, but HAO is looking weak here. Market Vectors Brazil Small-Cap ETF BRF The cautionary tale regarding BRF isn't new. If the ETF doesn't find support at its 50-day line, the thesis that BRF could head to $40 could easily be validate. If the technicals aren't enough to convince you, just remember that the weaker China looks, the worse it is for Brazil. First Trust ISE Chindia Index Fund FNI Expectations for slower Chinese growth and fading hopes that the Reserve Bank of India are the fundamental issues that could be a problem for the First Trust ISE Chindia Index Fund over the next few months. The rupee is weak, not good when India is buying high-priced oil, and if FNI doesn't find support around $21.50, more declines may be in the offing.