This has been a great year for Wall Street but other corners of the globe haven’t returned in that a stellar fashion. Trade war fears, a slowdown in activity and political crisis have weighed on foreign stocks occasionally and led it trail the U.S. Index S&P 500 (up 26.2% YTD as of Dec 13, 2019).
Still, the announcement of the phase-one U.S.-China trade deal in the fourth quarter and year-long easy money polices in various developed and emerging market economies pulled off global stocks.
Investors should note that Asia ETF iShares Asia 50 ETF (AIA - Free Report) was up 18.8%. iShares MSCI Emerging Markets ETF (EEM - Free Report) added about 13.4%, First Trust Latin America AlphaDEX Fund (FLN - Free Report) gained 15.3% and iShares China Large-Cap ETF (FXI - Free Report) nudged up only 9.9%.
Developed market ETF iShares MSCI EAFE ETF (EFA - Free Report) has tacked on 18.8% gains. iShares MSCI Japan ETF (EWJ - Free Report) has jumped 19%, Vanguard FTSE Europe ETF (VGK - Free Report) is up 19.7% and iShares MSCI Eurozone ETF (EZU - Free Report) has advanced about 19% this year.
What Led to the Somber Story for International Market?
Developed economies are slowing down this year. The International Monetary Fund has cautioned that the U.S.-China trade war will likely drag 2019 global growth to its slowest pace since the 2008-2009 financial crisis. The IMF’s projection for the 2019 GDP growth done in October was 3.0%, down from 3.2% projected in July.
As part of his protectionist agenda, Trump first slapped steel and aluminum import tariffs on China, Canada, Mexico and the EU. But the main battle has been against China for almost the past two years. While an initial level U.S.-Sino deal has been announced in December, President Trump levied a new round of metal tariffs on Brazil and Argentina.
No wonder, equities in emerging nations tanked to the lowest in 10 months in mid-2019 only to recoil from the fourth quarter (read: $8 Trillion Worth of EM Stocks in a Bear Market: ETFs to Play).
Global Policy Easing: A Great Savior in the Second Half
To abate growth concerns, a great cycle of global easing was set in motion. Australia, New Zealand, India, Turkey, Thailand, South Korea, Indonesia, Brazil, Mexico, South Africa and even the Fed and the ECB cut rates in the second half of this year. As many as 20 out of 32 central banks that Morgan Stanley tracks currently cutting interest rates with more easing on the horizon. Other key central bank like Bank of Japan has been maintaining ultra-easy monetary policy, if not slashing further (read: Play Global Bond ETFs to Join Central Banks' Rate Cut Euphoria).
A wave of cheap money inflows in international markets and low rates have finally resulted in foreign equity rally in the second half. Against this backdrop, below we highlight a few international ETFs that have topped not only the foreign markets but also the S&P 500 (read: Beyond US, These Foreign ETFs Are At Highs).
Best-Performing International ETFs
WisdomTree Global ex-U.S. Quality Dividend Growth Fund (DNL) – Up 32.9%
The fund measures the performance of dividend-paying stocks with growth characteristics in the developed and emerging markets outside the United States. The fund has double-digit weights in United Kingdom (17.04%) and Japan (11.34%).
AdvisorShares Dorsey Wright ADR ETF (AADR - Free Report) – Up 32.0%
The fund is actively managed. Brazil (13.3%), Netherlands (11.3%), India (9.4%), South Africa (8.6%) and United Kingdom (7.8%) are the top five economies of the fund.
First Trust Dow Jones International Internet ETF (FDNI - Free Report) – Up 31.0%
The fund looks to measure the performance of the 40 largest and most actively traded non U.S. international companies in the Internet industry that are engaged in internet commerce and internet services.
WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund (DHDG - Free Report) – Up 30.8%
The underlying WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Index is designed to provide exposure to the developed market companies while at the same time neutralizing exposure to fluctuations between the value of foreign currencies and the U.S. dollar with a hedge ratio ranging from 0 to 100% on a monthly basis. Here also, United Kingdom (22.9%) and Japan (19.7%) take the top two spots.
AI Powered International Equity ETF (AIIQ - Free Report) – Up 28.3%
This is an active ETF. It invests primarily in equity securities of companies in developed markets outside the United States. The 150-stock fund charges 79 bps in fees and yields 2.80% annually.
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