3 Country ETFs Taking Flight in H2 - ETF News And Commentary


The global stock market started the second half on a strong note courtesy of improving economic conditions and earnings optimism. The Dow topped 17,000 for the first time on accelerating job numbers and improving domestic economy. The comments from the latest Fed minutes also cheered up the global markets.

The minutes revealed that the Fed is in no hurry to raise interest rates and is on track to pull the world's largest economy out of an era of loose monetary policy, and plans to end its monthly asset purchases in October. Further, the developing markets are showing tremendous strength thanks to the Indonesia election and positive developments in key emerging markets, in particular China (read: 3 China ETFs Surging Higher ).

However, the recent Portuguese banking woes have spread worries over the health of the European market and threats of contagion in other developed nations. Additionally, fresh sanctions on Russia by the West, the crash of a Malaysian Airlines jet near the Russian/Ukrainian border, and renewed conflict between Israel and Palestine intensified concerns on the global market rally last week (read: Russian Sanctions and Malaysian Plane Crash Put These ETFs in Focus )).

Despite these headwinds, some country ETFs have performed remarkably well to start the second half. Below, we have highlighted three nations the funds of which gained double digits and are easily crushing the broad U.S. market returns. These could be strong momentum plays for investors heading into the second half of the year as well.


The Qatar market is best represented in ETF form by iShares MSCI Qatar Capped ETF ( QAT ) . This fund tracks the MSCI All Qatar Capped Index and holds a basket of about 27 stocks in the nation. It is largely concentrated on the top two firms - Masraf AL Rayan and Ooredoo - which make up for 18.34% and 9.21% share, respectively.

The product is targeted on financials, as this make up nearly three-fifths of the portfolio while telecom, industrials and energy round out the top four. The fund has amassed $34.1 million in its asset base since its debut nearly three months ago and charges 61 bps in fees per year. The ETF has surged 18.6% so far in the second half of the year (read: Middle East ETFs: UAE and QAT Off to a Rough Start ).

One of the key reasons for the fund's outperformance is definitely the expectation for the strong second-quarter corporate earnings. Robust numbers from Qatar National Bank and Ooredoo have further spread optimism into the earnings of the other companies propelling the stocks higher.

United Arab Emirates

After the wild ride last month on Iraq insurgency and property market bubble fear, stocks in this Middle East country have gained momentum since the start of second half. This is especially true as the latest real estate data suggests that the property market is booming. Though the property prices have risen 30% over the past 12 months, the companies are still eager to make big constructions.

Additionally, flourishing tourism and strong retail sales are driving growth in the economy. UAE stocks are also expected to lead Qatar in terms of profit growth this earnings season, which are further adding gains (see: all the Africa/Middle East ETFs here ).

There is currently one ETF option targeting the country, iShares MSCI UAE Capped ETF ( UAE ) , which was launched in late April. The fund provides exposure to 26 UAE stocks by tracking the MSCI All UAE Capped Index. Emaar Properties occupies the top spot with over 14% of assets while the next two holdings - DP World and AL DAR Properties - account for least 9% share each.

Like QAT, more than two-thirds of the fund's portfolio is dominated by financials, followed by industrials (18.99%), energy (5.61%) and healthcare (5.60%). UAE has accumulated $56.1 million in AUM so far while charging 61 bps in annual fees and expenses. The ETF has gained nearly 16% since the start of the second half.


Indonesian stocks are enjoying a huge rally this month on hopes for a possible Joko Widodo win in the presidential election, results of which are expected on June 22, and the resultant foreign capital inflow into the country (read: Indonesia ETFs in Focus Ahead of Elections ).

While the three funds targeting the nation have resulted in strong gains, Market Vectors Indonesia Small-Cap ETF ( IDXJ ) is a clear winner gaining over 12% quarter-to-date thanks to its true domestic exposure. It is unpopular and less liquid having AUM of $7.2 million and average daily volume of 23,000 shares. The fund tracks the Market Vectors Indonesia Small Cap Index while charges 61 bps in annual fees.

Holding 39 stocks, the product does a decent job of spreading out assets, as each security does not hold more than 6.1% of the total. However, it is a bit concentrated from a sector look as financials and industrials takes the top two positions at 31% and 28.1%, respectively, while energy and information technology round off to the next two spots at 15% and 10.4%, respectively.

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ISHARS-MS QATAR (QAT): ETF Research Reports

ISHARS-MS UAE (UAE): ETF Research Reports

MKT VEC-INDO SC (IDXJ): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

Referenced Stocks: QAT , UAE , IDXJ



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