Tapping into Top Country ETFs
By Ron DeLegge, Editor
May 19, 2009
SAN DIEGO (ETFguide.com) Ė A quick glance at foreign stock ETFs will show you whatís happening around the globe.
Since the beginning of the year, emerging market stocks (NYSEArca: EEM) are up 27.20%, making them the best performing segment within the global equity market.
Certain regions of the world are doing better than others. European stocks (NYSEArca: VGK) are up 2.37%, stocks from the Pacific Rim (NYSEArca: VPL) are up 0.80% while Latin American stocks (NYSEArca: ILF) have soared 32.61%.
What are some general characteristics of country specific ETFs?
Most single country ETFs own less than 100 stocks within their portfolio, making them concentrated investments. Along with owning just a handful of individual stocks these types of funds are focused on narrow industry sectors. For example, the performance of the Market Vectors Russia ETF (NYSEArca: RSX) is closely tied to the performance of commodities, like crude oil and industrial metals. Also, country specific ETFs often carry higher annual expenses compared to more diversified foreign stock ETFs.
Single country ETFs offer big opportunities, so letís evaluate 4 key funds:
iShares MSCI Brazil Index Fund (NYSEArca: EWZ)
EWZ is one of the most heavily traded single country ETFs. The fundís performance and yield are benchmarked to the MSIC Brazil Index. The fund holds approximately 70 stocks and the median market size is $2.23 billion. Energy (26.64%). basic materials (26.05%) and financial stocks (18.38%) are the largest sector representations.
Year-to-date, EWZ has soared 45.63%. In 2008, EWZ declined 55.80% and the fundís annual expense ratio is 0.63%.
iShares FTSE/Xinhau China 25 ETF (NYSEArca: FXI)
With more than $7 billion in assets, FXI is one of the most popular Chinese ETFs. The fund was launched in 2004 and it follows the FTSE/Xinhau China 25 Index. Almost 50% of the fundís sector representation is concentrated in financial stocks. While FXI focuses on Chinaís Blue Chip stocks, broader exposure to Chinese stocks with large, mid and small cap market sizes can be obtained via the excellent but less heralded SPDR S&P China ETF (NYSEArca: GXC).
Year-to-date, FXI has risen 22.59%. In 2008, FXI declined 49.88% and the fundís annual expense ratio is 0.74%.
Market Vectors Africa ETF (NYSEArca: AFK)
AFK follows the Dow Jones Africa Titans 50 Index which measures the stock performance of 50 companies that are headquartered in or generate the majority of their revenues in Africa. The index is weighted by float-adjusted market capitalization. Africa is a frontier market with vast resources that gets little attention from the financial media and investors. This is all the more reason to consider its investment merit and potential.
Year-to-date, AFK has posted a 14.43% gain. AFK was launched in July 2008 and the fundís annual expense ratio is 0.35%.
Claymore/BNY BRIC ETF (NYSEArca: EEB)
Which of the global emerging countries represent the best opportunities for capital growth? EEB takes a novel approach by following todayís largest emerging global stock markets: Brazil, China, India and Russia. This foursome is also known as the ďBRICĒ nations. Instead of betting on one horse you can bet on four.
Year-to-date, EEB has risen 34.43%. In 2008, EEB fell 54.48% and the fundís annual expense ratio is 0.60%.
Single country ETFs generally hold fewer stocks than more broadly diversified foreign stock ETFs. This explains their volatile up and down movements. It also illustrates why single country ETFs have such dramatic performance extremes Ė often putting them at the very top or very bottom quartile of the performance spectrum. Still, country ETFs are an excellent alternative to betting on individual foreign stocks.
Which are the best single country ETFs to own right now? In the May 9th ETF Weekly Pick section of our Profit Strategy Newsletter we highlighted one particular ETF that has positive fundamentals for capital growth. We laid out a detailed analysis of why the prospects for this particular country ETF are bright, even factoring in the global economic recession. Check it out.