CAPPT: 2013's Top-Performing EM ETF Acronym
Just about a year ago, to little hoopola, a new emerging markets acronym was coined to compete with more popular fare such as BRIC, CIVETS and MIST. That acronym is CAPPT for Chile, Argentina, Peru, the Philippines and Thailand.
Admittedly, Argentina, a frontier market, was included more out of necessity for a vowel than out of a bullish outlook on the economically challenged South American nation. Due to lingering fears about a second sovereign debt default this century, it was no surprise to see the Global X FTSE Argentina ETF (NYSE: ARGT) finish 2012 as the laggard among CAPPT ETFs.
Despite ARGT’s drag, CAPPT was solid last year and the good times are continuing again in 2013. In fact, while the mainstream financial media and traders everywhere continue to pay heavy attention to BRIC, CIVETS and MIST, CAPPT is shining. Shining as in outperforming those other emerging markets acronyms on a year-to-date basis.
Using the largest ETFs by assets under management, here is how things have played out to this point in 2013 for the various developing world acronyms, CAPPT included.
Basically, an epic fail here. The iShares MSCI Brazil Capped Index Fund (NYSE: EWZ) is the only one of the four major BRIC ETFs that is up year-to-date and only modestly so. Factor in the iShares FTSE China 25 Index Fund (NYSE: FXI), the Market Vectors Russia ETF (NYSE: RSX) and the WisdomTree India Earnings ETF (NYSE: EPI) and the average loss for this quartet of ETFs is 2.83 percent year-to-date.
At the start of the year, we predicted that Vietnam, Turkey and Indonesia would be the top-three CIVETS markets this year and that prediction has looked good. To be fair, the order is currently the Market Vectors Vietnam ETF (NYSE: VNM), the Market Vectors Indonesia ETF (NYSE: IDX) and the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR).
Those are the three CIVETS ETFs that are higher year-to-date. The Global X FTSE Colombia 20 ETF (NYSE: GXG) is off 3.8 percent this year, which looks good compared to the 8.7 percent loss for the Market Vectors Egypt ETF (NYSE: EGPT) and that looks good compared to the 9.3 percent fall for the iShares MSCI South Africa Index Fund (NYSE: EZA).
Clearly, “IV” has been the best part of CIVETS this year.
MIST, another acronym given to the world by Goldman Sachs (NYSE: GS), soared last year, helped in large part by the iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW) and TUR. Both have cooled this year and the iShares MSCI South Korea Index Fund (NYSE: EWY), the “S”in MIST, is down about 5.5 percent. That leaves IDX as the only MIST ETF that has truly impressed year-to-date.
Average year-to-date return for the MIST ETFs: An unimpressive 2.24 percent.
Once again, it is a Latin American ETF hindering CAPPT. This year, it is the iShares MSCI All Peru Capped Index Fund (NYSE: EPU), which has fallen on hard times because of its heavy mining and materials exposure. EPU is down 5.6 percent year-to-date.
Fortunately, ARGT has bounced back somewhat as fears have ebbed regarding another Argentine default. That said, Peru is South America’s fastest-growing economy and the medium-term outlook there is far brighter than in Argentina. Staying in South America, the iShares MSCI Chile Investable Market Index Fund (NYSE: ECH) has also proven durable this year, outperforming EPU, EWZ and GXG.
The crown jewels in the CAPPT crown, just as they were last year, have been the iShares MSCI Thailand Capped Investable Market Index Fund (NYSE: THD) and the iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE). Those juggernaut ETFs highlight why the CAPPT acronym merits more attention than it has previously received. Plenty of folks have said emerging markets are lagging this year, but that is a broad statement that really applies to BRIC and ignores obvious leadership from EPHE and THD.
Fitch recently boosted Thailand’s credit rating and it would be not be surprising to see the Philippines move to investment grade territory this year. With those catalysts and others in mind, EPHE and THD should boost CAPPT’s average year-to-date return of 6.3 percent throughout 2013.
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