With the U.S. markets reaching new all-time highs nearly each and every day, most retail investors have become blind to the idea of investing in other markets. One group that is often overlooked is the tiger cub economies, which represent the developing nations of Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
These five nations are currently undergoing rapid industrialization and technological innovation, and the higher-than-average growth rates in the region make this an ideal group for those looking to invest internationally. In this article, we take a look at the charts of key exchange-traded products in an attempt to figure out how active traders will likely look to trade this dynamic group. (For further reading, check out: Introduction to Asian Financial Markets.)
iShares MSCI Indonesia ETF (EIDO)
Indonesia has the largest economy in Southeast Asia and is regarded as one of the fastest growing nations in the world. Taking a look at the chart of the iShares MSCI Indonesia ETF, which comprises 92 holdings and is regarded as one of the most common barometers for the country's market, you can see that the fund is trading within an established uptrend.
The recent retracement within the descending channel pattern will likely be used to suggest that the momentum is consolidating, and the recent bounce off of the 200-day moving average could be what is needed to trigger a break beyond the nearby resistance. A close above the upper trendline will likely lead to a flood of buy orders, while the major support levels provide optimal positioning for stop-losses and should offer a lucrative risk-to-reward ratio. More specifically, stops will likely be placed below $25.92 in case of a surprise move to the downside. (For more, see: 3 Reasons to Invest in Asia's Emerging Markets.)
VanEck Vectors Vietnam ETF (VNM)
Vietnam is undoubtedly one of the most dynamic nations in the world and is quickly climbing the ranks as measured by purchasing power parity. The country's strengthening agriculture, services/tourism, banking, energy and manufacturing sectors make this a hot spot for investment, and based on the chart of the VanEck Vectors Vietnam ETF, you can see that the price is currently trading near an influential level of support.
Several consecutive closes above the dotted trendline will be a clear technical buy sign and could lead to a surge in buying pressure. Stop-losses will likely be set directly below the dotted trendline upon a breakout or below the 50-day or 200-day moving averages, depending on risk tolerance and investment horizon. (See also: Why Vietnam Deserves Your Next Investment Dollar.)
iShares MSCI Thailand Capped ETF (THD)
From an active trader's perspective, one of the most interesting charts when it comes to analyzing the tiger cub economies currently belongs to Thailand. In what some hope is a leading indicator, the bulls were just able to send the price of the iShares MSCI Thailand Capped ETF (THD) above the resistance of a short-term trendline, which is a clear buy sign and could lead to a surge in momentum.
The breakout (as identified by the blue circle) is what many have been waiting for. Most traders will likely set their stops below the trendline or the trailing 50-day moving average, depending on risk tolerance. (For further reading, check out: 3 Emerging Market ETFs to Watch in 2017.)
The Bottom Line
Many retail investors have never heard of the tiger cub economies. However, based on the charts shown above, it appears as though these developing nations in Southeast Asia could be among the best places to allocate capital over the coming months and most likely into 2018. (For more, see: Invest in International Markets With These ETFs.)
Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own any shares of the assets mentioned.