While the worldwide stock markets impressed in the first half of 2015, the spotlight was on international investing. This is especially true as Vanguard FTSE All-World ex-US ETF (VEU - ETF report), targeting the international equity market, has gained about 6.5% so far this year compared to a gain of 4.1% for iShares MSCI ACWI ETF (ACWI - ETF report), which targets the global stock market including the U.S. (see: all the World ETFs here).
The winners are spread across many corners of the globe, though a few developed and developing economies are still suffering from slow growth amid streaks of volatility and uncertainty. Most of the growth in international stocks came from ultra-cheap money that moved freely all over the world in stark contrast to the U.S. tightening policy.
In particular, China was on a tear buoyed by rounds of easing polices while the Russian stocks made a strong comeback following last year’s malaise. The Indian economy too regained its momentum lately, after losing all its shine this year despite the rate cuts. Among the developed markets, Japan and Europe held a firmer footing (read: 3 India ETFs Surging Back to Health).
The lure of the international bourses is likely to remain as the Fed has set the stage for a slower-than-expected interest rate rise, which might weaken the U.S. dollar and attract more foreign inflows, raising demand for the equities in these nations. Given this, we have highlighted the top country in terms of stock market performance and their best ETFs. Any of these strong momentum plays could be a compelling choice for investors ahead of the second half, provided the same economic trends persist.
China - Market Vectors China SME-ChiNext ETF ((CNXT - ETF report))
This fund offers exposure to the largest and most liquid China A-share stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange by tracking the SME-ChiNext 100 index. It holds 101 stocks in its basket with none accounting for more than 4.05% share.
More than one-third of the portfolio is allotted to information technology, while industrials, consumer discretionary and health care round off the next three spots with double-digit exposure each. The product is unpopular and illiquid with AUM of $86.3 million and average daily volume of more than 89,000 shares. It charges 66 bps in fees per year and surged over 57% in the first half of the year. CNXT has a Zacks ETF Rank of 2 or ‘Buy’ rating (read: 2 China ETFs Hitting All-Time Highs).
Japan - WisdomTree Japan Hedged Financials Fund ((DXJF - ETF report))
This ETF targets the financial segment of the Japanese equity world without the currency risk. It follows the WisdomTree Japan Hedged Financials Index holding 80 stocks in its basket. The fund is highly concentrated on the top three firms – Mitsubishi UFJ Financial. Sumitomo Mitsui Financial and Tokio Marine Holdings – that collectively make up for 29.5% of assets. In terms of industrial exposure, diversified banks and regional banks take the top two spots at 31.5% and 29.8%, respectively, while property & casualty insurance makes up for 14.2% share.
Though the product has a meager AUM of $31.8 million and trades in a paltry volume of less than 14,000, it has returned solid 29% so far this year. It charges investors 43 bps in annual fees and has a Zacks ETF Rank of 1 or ‘Strong Buy’.
Russia - Market Vectors Russia ETF ((RSX - ETF report))
This product is popular and liquid with AUM of $2.1 billion and average daily volume of around 14.7 million shares. It tracks the Market Vectors Index and charges 61 bps in fees per year from investors. Holding 50 securities in its basket, the fund is heavily concentrated on the top 10 holdings with 60.1% of total assets (read: Russia ETFs Making a Strong Comeback).
In terms of sectors, energy dominates the fund’s returns with more than two-fifth of the total portfolio while materials, financials and consumer staples round off to the next three spots with double-digit allocation each. The ETF has added about 25% in the year-to-date time frame and has a Zacks ETF Rank of 3 or ‘Hold’ rating.
Ireland - iShares MSCI Ireland Capped ETF (EIRL)
The fund tracks the MSCI All Ireland Capped Index and provides exposure to a small basket of 25 Irish stocks. The product is heavily concentrated on its top firm – CRH Plc – that alone accounts for less than one-fourth share in the basket while the next two firms – Kerry Group and Bank of Ireland – make up for over 11% exposure each. Other firms hold less than 5% of assets.
From a sector look, materials takes the top spot at 27.3%, closely followed by consumer staples (23.7%), industrials (18.4%) and financials (17.5%). The ETF has amassed about $106 million in its asset base and sees a pretty low volume of around 34,000 shares a day. It charges 48 bps in fees per year from investors and gained 17.1% in the first half. The fund has a Zacks ETF Rank of 2 (read: 3 Country ETFs Upgraded to Buy).
Denmark - iShares MSCI Denmark Capped ETF ((EDEN - ETF report))
This fund offers exposure to 39 Danish securities by tracking the MSCI Denmark IMI 25/50 Index. More than one-third of the portfolio is dominated by the health care sector with a top firm – Novo Nordisk – accounting for 22.3%. Other firms account for no more than 8.50% of assets while industrials and financials round off to the next two spots from the sector look (read: 3 European ETFs Leading the Market Higher).
The fund has been able to manage $66 million in its asset base while sees a low volume of 25,000 shares a day on average. Expense ratio came in at 0.53%. The fund returned about 17% in the first half and has a Zacks ETF Rank of 2.
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