+ 4.13
+ 1.29%
+ 4.71
+ 1.55%
+ 5.06
+ 1.35%
+ 1.75
+ 1.01%

CAPPT Beats Goldman's MIST (THD, EWW, IDX)

April 20, 2012 11:53 am
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CAPPT Beats Goldman's MIST (THD, EWW, IDX)

A few weeks ago, we introduced the world to the next big thing in emerging markets acronyms. That being CAPPT, which stands for Chile, Argentina (a frontier market), Peru, the Philippines and Thailand.

Goldman Sachs (NYSE: GS), the venerable bank that gave the world BRIC, has added to their catchy emerging markets acronym lineup with MIST. MIST countries are Mexico, Indonesia, South Korea and Turkey.

Don’t get us wrong. MIST’s constituent countries represent some compelling emerging markets opportunities. In particular, we like Indonesia and Turkey, both of which also have a home in the CIVETS acronym.

While the Market Vectors Indonesia Index ETF (NYSE: IDX), the largest and oldest of the three Indonesia-specific ETFs on the market today, has been somewhat of a laggard this year, but there’s good reason to embrace Indonesia and IDX over the medium- to long-term.

As for Turkey and the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR), there are ample reasons to embrace this market and this ETF. Those reasons include a strong currency, favorable demographics and a shrinking deficit.

Still, we felt compelled to see how our CAPPT acronym stacked up against Goldman’s MIST. In theory, MIST should have had an advantage. After all, the “A” in CAPPT, Argentina, hasn’t been doing anyone any favors recently. Before today’s 2% gain, the Global X FTSE Argentina 20 ETF (NYSE: ARGT) was off more than 7% in the past week due to the Argentine government’s nationalization tendencies.

Using the four largest ETFs tracking MIST’s markets – IDX, TUR, the iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW) and the iShares MSCI South Korea Index Fund (NYSE: EWW), the year-to-date returns through today are as follows: 5.12% for IDX, 11.93% for EWY, 13.73% for EWW and 24.48% for TUR. That works out to an average of 13.8%.

Not too shabby and certainly better than what the S&P 500 has delivered. There are still some concerns with MIST. First, while Mexican equities and EWW have looked good this year, that market has shown a noticeable correlation to U.S. stocks over time. With concerning economic data popping up and “sell in May and go away” almost here, perhaps U.S. and Mexican equities are due for a breather.

It should also be noted that perhaps the only reason anyone thinks South Korea is an emerging market is because MSCI hasn’t promoted it developed market status. South Korea is an OECD member. FTSE, the World Bank and the International Monetary Fund all gave South Korea developed market status long ago. It’s only a matter of time before MSCI does the same and that could hamper EWY’s returns.

As for CAPPT, ARGT is a drag, just as we thought. Through today, the ETF is down 11.18% year-to-date. Each CAPPT member only has one ETF devoted exclusively to it, so picking the funds wasn’t hard and this what we find in terms of year-to-date returns with the remaining four: The iShares MSCI Chile Investable Market Index Fund (NYSE: ECH) is up 16.26%, the iShares MSCI All Peru Capped Index Fund (NYSE: EPU) is up 20.62%, the iShares MSCI Thailand Investable Market Index Fund (NYSE: THD) has surged 21.71% while the iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE) has soared 24%.

That has the CAPPT quintet up an average of 14.3% and that’s including ARGT’s glum performance. What if we throw out the worst performer from each group, IDX and ARGT? MIST, becomes MST and the year-to-date average grows to 16.71%. CAPPT becomes CPPT and the returns soar to 20.64%. In other words, CAPPT wins and it has the potential to keep outperforming MIST going forward.

For more on emerging markets ETFS, please click HERE.

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