Vanguard is offering a small cap international ETF which tracks the FTSE Global Small Cap ex-U.S. Index (see Index Universe article). The fund considers both developed and emerging countries. While both "small cap" and "emerging" hint of increased risk, the ETF holds 2,100 different companies, providing broad exposure. The ETF also has a relatively small expense ratio at 0.38%, providing an inexpensive and diversified way to take on some international and emerging growth exposure.

U.S News and World Report has an interview with Jon Auerbach discussing potential new BRIC-type countries. Nigeria is mentioned as being an important market given its lead in banking in Africa. Zimbabwe, discussed in an earlier post regarding their inflationary problems, may also present opportunity depending on upcoming election results, and their ability to contain and control hyperinflation. Opportunities exists in Kenya as well, after resolving many of the problems that occurred early in the year.

There is an interesting article from Bloomberg on the issue of decoupling of the Asian global markets from the US. YTD, the Chinese and Indian markets are among the 10 worst performing global markets. One possible explanation is the increased selling from hedge funds in the US as they meet margin calls and put money to work elsewhere. Commodity inflation has also prevented these economies from employing a looser monetary policy. Many company shares in Asia are also coming out of lockup, allowing nervous investors to lock into gains in an uncertain environment. Taiwan, Pakistan, Thailand, and Sri Lanka have posted positive gains YTD, between 2-8%, but given the political and economic issues in these countries, risk premiums are certainly higher.

The BRIC countries are down collectively this year (Brazil -11%, Russia -13%, India - 40%, China-26%). On the other hand, Pakistan, Peru, and Chile are up 9.5%, 7.1%, and 6.6%, respectively YTD. It looks like new "emerging markets" are emerging.

The NY Times is reporting that a new law in China could impede the Microsoft deal for Yahoo if things progress beyond August 1st, once a new Chinese anitmonopoly law takes effect. Yahoo's 40% stake in Alibaba.com could cause the problem. Beyond the Microsoft-Yahoo deal, this new law could place China in a position similar to the U.S. and European Union with regard to regulatory oversight. Increased cross-investment will only continue to complicate regulatory matters.

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