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The global economy is surely on an uptrend. As per the World Bank, the global economy may witness a seven-year high growth rate next year. In fact, several foreign economies, especially in Europe, were off to a great start in 2017. But probably this rising tide couldn’t lift all economies.
There are several country ETFs that are witnessing painful trading. Below we highlight a few that investors may want to stay away from. All these ETFs carry a Zacks Rank #4 (Sell).
The Brazilian economy has been a victim of economic and political woes in recent times. The current president, Michel Temer, was accused of bribing Eduardo, the former speaker of the house in May and thus manipulating the corruption probe and last year’s impeachment of the former president, Dilma Rousseff. Notably, Rousseff was held responsible for illegally financing government spending (read: Top ETF Stories of May).
Though the top judge of Brazil’s supreme electoral tribunal (TSE) cleared Brazil’s president Michel Temer of charges on June 9, uncertainty over the needed reforms linger. In the wake of the crisis, Brazil's Central Bank found that experts cut GDP growth forecast for 2017 from 0.5% to 0.41% and from 2.4% to 2.3% for 2018. The World Bank forecasts Brazil's GDP to grow only 0.3% this year and 1.8% next year. This makes it important to stay out of EWZ.
Peru's economy expanded 2.1% in Q1 of 2017 from the year-ago period, marking the lowest growth in two years. Economic growth was 3% in the fourth quarter of 2016. This piece of information is strong enough to make investors edgy about Peru investing (read: 4 Best Single-Country ETFs of 2016).
Russia – VanEck Vectors Russia ETF
About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largest oil reserve in the world and the biggestnatural gas reserve. This makes it clear why Russia’s economy is highly dependent on oil price movement.
With oil prices under pressure despite the extension of the output cut deal, Russia ETFs are likely to feel the pinch. Notably, United States Brent Oil BNOis down about 17.7% so far this year (as of June 12, 2017) and RSX has lost about 8.5% (read: 5 Country ETFs to Benefit from Crude Oil's Jump).
Colombia – Global X MSCI Colombia ETF (GXG - Free Report)
Colombia's economy is also energy-dependent and can also be hit hard by the slump in global oil prices. Due to energy issues, the economy expanded 1.1% in Q1, below the central bank's estimate of 1.3%. Inflation in the country is still subdued. All these make Colombia an unimpressive investment.
The Middle East has found another reason to be tensed. The OPEC top brass Saudi Arabia and other Arab states cut their diplomatic ties with Qatar recently. As the move caused the worst tiff in years among some powerful Arab countries, Qatar ETF may be in trouble. In addition to this, GDP in Qatar shrank 2.10% in Q4 of 2016 over the previous quarter. Against this type of an economic backdrop, edgy investors may want to stay away from QAT (read: Stay Away from These Middle East ETFs on Gulf Rift).
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5 Country ETFs to Sell
The global economy is surely on an uptrend. As per the World Bank, the global economy may witness a seven-year high growth rate next year. In fact, several foreign economies, especially in Europe, were off to a great start in 2017. But probably this rising tide couldn’t lift all economies.
There are several country ETFs that are witnessing painful trading. Below we highlight a few that investors may want to stay away from. All these ETFs carry a Zacks Rank #4 (Sell).
Brazil – iShares MSCI Brazil Capped (EWZ - Free Report)
The Brazilian economy has been a victim of economic and political woes in recent times. The current president, Michel Temer, was accused of bribing Eduardo, the former speaker of the house in May and thus manipulating the corruption probe and last year’s impeachment of the former president, Dilma Rousseff. Notably, Rousseff was held responsible for illegally financing government spending (read: Top ETF Stories of May).
Though the top judge of Brazil’s supreme electoral tribunal (TSE) cleared Brazil’s president Michel Temer of charges on June 9, uncertainty over the needed reforms linger. In the wake of the crisis, Brazil's Central Bank found that experts cut GDP growth forecast for 2017 from 0.5% to 0.41% and from 2.4% to 2.3% for 2018. The World Bank forecasts Brazil's GDP to grow only 0.3% this year and 1.8% next year. This makes it important to stay out of EWZ.
Peru – iShares MSCI All Peru Capped (EPU - Free Report)
Peru's economy expanded 2.1% in Q1 of 2017 from the year-ago period, marking the lowest growth in two years. Economic growth was 3% in the fourth quarter of 2016. This piece of information is strong enough to make investors edgy about Peru investing (read: 4 Best Single-Country ETFs of 2016).
Russia – VanEck Vectors Russia ETF
About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largest oil reserve in the world and the biggestnatural gas reserve. This makes it clear why Russia’s economy is highly dependent on oil price movement.
With oil prices under pressure despite the extension of the output cut deal, Russia ETFs are likely to feel the pinch. Notably, United States Brent Oil BNO is down about 17.7% so far this year (as of June 12, 2017) and RSX has lost about 8.5% (read: 5 Country ETFs to Benefit from Crude Oil's Jump).
Colombia – Global X MSCI Colombia ETF (GXG - Free Report)
Colombia's economy is also energy-dependent and can also be hit hard by the slump in global oil prices. Due to energy issues, the economy expanded 1.1% in Q1, below the central bank's estimate of 1.3%. Inflation in the country is still subdued. All these make Colombia an unimpressive investment.
Qatar – iShares MSCI Qatar Capped (QAT - Free Report)
The Middle East has found another reason to be tensed. The OPEC top brass Saudi Arabia and other Arab states cut their diplomatic ties with Qatar recently. As the move caused the worst tiff in years among some powerful Arab countries, Qatar ETF may be in trouble. In addition to this, GDP in Qatar shrank 2.10% in Q4 of 2016 over the previous quarter. Against this type of an economic backdrop, edgy investors may want to stay away from QAT (read: Stay Away from These Middle East ETFs on Gulf Rift).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>