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Last week was a mixed bag overall for the U.S. equity market. The Fed kept its hand steady on its QE program, leaving many investors to focus internationally instead (Homebuilders ETFs Continue to Rally).

This largely kept investors looking at euro zone worries, as these reemerged last week after E.U. leaders announced they would impose bank levies on Cypriot deposits. The news not only brought a halt to Wall Street gains but impacted the equity market globally as well.

Wall Street, after remaining in the red for most of the week, ended the week in the green. S&P 500 closed 0.72% up while the DJIA ended the week up after gaining 0.70%. Yet these performances paled in comparison to some international products which stole the show last week, including the following ETFs:

Among the top performers, Japan ETFs put up a remarkable show last week, especially in the small cap arena. The story of Japan’s economic revival commenced when the government under Prime Minister, Shinzo Abe, took control. Shinzo Abe’s goals clearly focused on monetary policy easing, debt financing, considerable spending on infrastructure and bringing back inflation (3 ETFs Beating the S&P 500).

Prime Minister Shinzo Abe has asked the Bank of Japan (BOJ) to implement unlimited monetary easing in order to weaken and stabilize the currency, yen. Abe has also set a target for inflation at 2% in order to reverse decades of deflation.

Japan’s expectation of overcoming years of deflation was further fueled by a statement passed by the new governor of BOJ, Haruhiko Kuroda.

Haruhiko Kuroda revealed its intention in a statement that reaffirmed that BOJ would continue to assist in Abe's economic policies by entering another phase of monetary easing or open ended asset purchase program.

Many of Japan’s small cap index funds exhibited a strong performance after BOJ passed its statement to achieve a 2% inflation target for the economy through aggressive monetary easing. In particular, the iShares MSCI Japan Small Cap Index Fund (SCJ - ETF report) recorded a gain of 3.1% for the week (DXJ--Best ETF to Play the Japan Rally).

The list of top performers also included The WisdomTree Japan SmallCap Dividend ETF (DFJ - ETF report) which recorded a gain of 2.45% and First Trust's Japan AlphaDex ETF (FJP) which registered an increase of 1.45% for the week.

Slumping ETFs

While Japan ETFs continued with their strong performance despite the escalated euro zone worries, Indian ETFs turned out to be the worst performers of the week.

India focused ETFs such as the Market Vectors India Small-Cap ETF (SCIF - ETF report) and the EGShares India Infrastructure ETF (INXX - ETF report) both recorded a sharp fall last week as Indian equities continued to be a major drag on ETF performances overall. SCIF posted a decline of 9.04% while INXX recorded a loss of 8.42%.

The dismal performance of Indian ETFs came in the wake of worries after a regional party withdrew from the ruling coalition. In fact, a series of negative developments is raising concerns about foreign investor inflows, which had played a critical role in the strong gains of domestic shares last year (Top Ranked India ETF in Focus—PIN).

However, it should be noted that in recent times, the Indian government has introduced various reforms and encouraged foreign direct investment in the economy. The government granted permission to open foreign supermarket chains in India, gave consent to foreign airlines to procure stakes in local carriers, and lifted the state-regulated prices of some fuels.

Despite these efforts, development has continued at a very slow pace while high interest rates to deal with elevated inflation levels have further impeded the Indian growth story. Also, the fiscal and current account deficits make the picture even worse, suggesting there could be trouble ahead for these ETFs as well (3 Foreign ETFs Still Beating the S&P 500).

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