3 International ETFs Beating SPY This Year - ETF News And Commentary

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While investing in U.S. markets has been great so far this year, international investing has not been so encouraging. This is because developed markets started the year on a solid note but lost momentum with Europe struggling to prop-up growth and Japan suffering from biggest setback following a sales tax increase.   


The situation will continue to deteriorate as the dollar is strengthening and concerns are growing over the possible interest rate hike sooner than expected. This could create tough times for investors seeking to invest in foreign markets. If interest rates rise, it would pull capital out from these markets, dulling the appeal for the equities in these nations.


Given this trend, most of the emerging markets like India, Indonesia, Thailand and South Africa have nevertheless shown tremendous strength driven by the election euphoria and additional reforms. This has led the broad emerging market space to a three-year high (read:
Emerging Market at 3-year High: 3 ETFs Worth A Look
).


There are plenty of international ETFs that have easily crushed the broad market fund (
SPY
) by wide margins from a year-to-date look. Investors should note that the ETF winners are not spread out across broad markets but mainly belong to developing space.


Below, we have highlighted three country ETFs that have been the star performers so far this year and led the international space higher. This trend is likely to continue as long as the current trends persist.


India ETFs

The Indian stock market has been surging this year on hopes of structural reforms implemented by the new business-friendly government that could turn around the beleaguered economy. Further, overall fundamentals started to improve for the Indian economy. Economic growth has accelerated to the highest level in two years for the second fiscal quarter, current account deficit is narrowing, fiscal deficit is under control, inflation has been trending down reaching the lowest level in almost two years, and rupee has stabilized.


Given encouraging developments, all Indian ETFs have been spiking in the year-to-date time frame with most of them gaining over 40%. Among these, the small cap centric
Market Vectors India Small-Cap Fund (SCIF)
was the star performer returning nearly 53%. This fund tracks the Market Vectors India Small-Cap Index, holding 94 securities in its basket (read:
India ETFs: Best of the BRICs Now?
).
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The product is well spread out across each component as every single security makes up for less than 3.6% of assets. From a sector look, financials and consumer discretionary take the top two spots with 26.5% and 23.3% share, respectively, while industrials and information technology make up for the next two spots.


The fund has so far amassed $356.4 million in its asset base while charging 93 bps in annual fees. Volume is good, exchanging about 230,000 shares in hand per day on average. SCIF has a Zacks ETF Rank of 3 or ‘Hold' rating with High risk outlook (see:
all the Emerging Asia Pacific ETFs here
).


Egypt ETFs

Investors flocked to the volatile Egyptian securities after the country dodged a demotion by the index provider MSCI to frontier market from emerging markets status on June 11. This spread optimism across the broader market, pushing the stocks higher. This is especially true, as Egyptian equities have seen massive inflows of
$406 million
since June 11 from non-Arab investors.     


Egypt is now in a much better position compared to last year with both political and economic stability. In addition, stabilization of Egyptian pound and stimulus packages from the Gulf states – Kuwait, Saudi Arabia, and the United Arab Emirates – are boosting business confidence and the future growth for Egypt (read:
Inside the Surging Egypt ETF
).


Given the strong recovery, the only ETF tracking the nation
Market Vectors Egypt Index ETF (EGPT)
has risen nearly 42% in the year-to-date time frame. The fund tracks the Market Vectors Egypt Index and holds 26 stocks in its basket. It has managed $91.3 million in its asset base while trades in light volume of less than 22,000 shares a day. Expense ratio came in at 0.98%.


In terms of holdings, nearly half of the total assets are invested in the financial sector, with about 9.4% weight assigned to the top holding – Commercial International Bank Egypt. The product has a slight tilt toward large caps at 66% while mid and small caps take the remainder. The fund currently has a Zacks ETF Rank of 4 or ‘Sell' rating with a High risk outlook.


Indonesia ETFs

Indonesian stocks are enjoying a huge rally driven by the new president's reforms that are expected to improve the presently sluggish growth, weak currency, widening current account deficit and rising inflation in the country. He aims to push economic growth rate to 7% in two years by introducing various education and health programs, expanding infrastructure, and creating more jobs. This represents the highest growth since the 1997–98 Asian financial crisis.


Given the new government's promise to turn around the beleaguered economy, Indonesian ETFs saw smooth trading this year. While all the three ETFs have performed remarkable well,
iShares MSCI Indonesia Investable Market Index Fund (EIDO)
is leading with 29.4% gain so far. This is the most popular ETF tracking the Indonesian market with AUM of $588.3 million and average daily volume of nearly 635,000 shares.


The fund tracks the MSCI Indonesia Investable Market Index, holding 103 securities in its basket while charging 62 bps in annual fees from investors. The product is somewhat concentrated on both sectors and securities (read:
Indonesia ETFs Set to Climb Higher
).


The top two firms account for nearly 10% of the total assets while from a sector look, financials dominates the fund's return with one-third share. The fund has a definite tilt toward large cap stocks at 84% and has a Zacks ETF Rank of 3 or ‘Hold' rating with High risk outlook.


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MKT VEC-INDI SC (SCIF): ETF Research Reports

MKT VEC-EGYPT (EGPT): ETF Research Reports

ISHARS-MS INDON (EIDO): ETF Research Reports

SPDR-SP 500 TR (SPY): ETF Research Reports

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