Many investors are finally starting to believe that the U.S.
market is back on track. After all, the DJIA is at an all-time
high, while the housing and jobs markets are also performing well
to start 2013 (
Impact of Positive Jobs Data on ETFs
).
It appears that the Federal Reserve's measures along with
decent U.S. data is finally pushing stocks higher, rescuing
investors from a disappointing start to the year. And with a lack
of big hurdles on the horizon, some are predicting that this
trend will continue as we head into April as well.
As a testament to this bullish attitude, investors have seen
the benchmark S&P 500, as represented by the
SPDR S&P 500 ETF (
SPY
),
move continually higher and within striking distance of all time
highs. In fact, the ETF's one year performance is already
impressive, having added over 13.8%.
Still, while many investors may be focused in on the American
market, there are plenty of other developed nations that have
actually beaten out the U.S. in the past year. These markets may
often be overlooked, but they are clearly capable of big gains as
well.
So for investors seeking foreign plays that are doing well in
this market environment, a closer look at any of the following
three
ETFs
could be a good idea. This is not only from a diversification
perspective, but quite possibly if these trends continue, a
return look as well:
Australia
Australia is one such developed economy which is rich in
natural resources, has a better fiscal position than many other
developed economies, and is (relatively) close to booming
Asian-Pacific markets (
Australia ETF Investing 101
).
The economy posted a solid GDP growth rate of 3.2% in 2012 and
has not seen a recession for 21 years. Australia, a country
blessed with immense mineral wealth, has been enjoying the boom
in the mining sector due to increased demand for iron ore and
coal from emerging economies.
However, the slowdown in the Chinese economy impeded growth of
the mining sector as China accounts for two-thirds of Australia's
iron ore exports and thereby plays an influential role in the
economy's performance. But with China showing signs of
rebounding, it seems that the mining sector in Australia will
regain strength and commodity prices will again shoot up.
So investors looking to play this trend in the Australian
economy can look to invest in one of the most popular options in
the ETF industry.
iShares MSCI Australia Index Fund (
EWA
)
portfolio of 71 stocks represent some of the largest
Australian-listed securities, and easily the most popular choice
in teh Aussie ETF market (
Australia ETFs to Play the Coming Shale Boom
)
EWA has managed to beat SPY in the one year period with a
return of 23.5% while its 2012 gains stand at 21.5%.
Australia ETF in Focus
This is one of the oldest ETFs to tap the Australian equity
market. The fund manages an asset base of $2.7 billion and trades
with volumes of more than one million shares a day. In spite of
providing exposure to a large basket, the fund has 60.9% of
assets invested in the top ten choices (
Do Country ETFs Really Provide
Diversification?
).
While many investors might expect the ETF to be heavy in
materials firms, the fund, like many other country-specific
ETFs, has a heavy exposure level to the financial sector of
the economy. Financials dominates 49.3% of the performance of the
ETF while another 19.8% goes to the materials sector.
Among individual holdings, however, the highest allocation
goes to the mining giant BHP Billiton (10.84%) and financial
behemoth Commonwealth Bank of Australia (10.63%). The fund
charges a fee of 71 basis points annually.
Sweden
The Swedish economy emerged from the financial crisis as one
of the strongest in Europe. The strength of the economy lies in
low levels of public debt and a current account surplus (
Nordic ETF Investing 101
).
Although the economy has somewhat slowed down in the fourth
quarter of 2012, it will be able to pick up on the back of more
expansionary policies and a stabilizing export market.
However, rising unemployment levels remain a matter of concern
for the economy. The government expects Sweden's jobless rate to
rise to 8.2% in 2012, compared with the previous forecast of
7.5%.
Still, given its overall strength, investors may still want to
tap the economy with the
iShares MSCI Sweden Index Fund (
EWD
)
. This is the lone ETF for establishing exposure in Swedish
securities directly, holding about three dozen stocks in its
portfolio.
The fund's performance has been quite impressive in the
year-to-date period, while gains over the one year time frame
have been solid at 18.1%, easily beating out SPY's returns in the
same time frame.
Sweden ETF in Focus
EWD manages an asset base of $413.3 million of which the ten
largest holdings make up 61.3%. Ericsson LM-B, Hennes &
Mauritz, and Nordea Bank form the top line of the fund. Among
sector holdings, industrials and financials play an influential
role in the performance of the ETF with a share of 30.6% and
28.5%, respectively.
The fund also yields an impressive dividend of 2.63% per year,
greatly easing the 51 basis point expense ratio for investors (
ETFs for the Most Competitive Countries on
Earth
).
Denmark
Denmark appears to be slowly recovering from the financial
crisis and the economy is expected to regain some strength and
show improvement in 2013. The unemployment level in the economy
is also expected to come down going forward.
The country is expected to have healthy public finances, which
would keep the interest rates down, while inflation has also been
moderate. Further, Denmark enjoys significant account surplus,
foreign-exchange reserves and a favorable public debt
situation.
However, the Euro-zone accounts for a major portion of
Denmark's exports and weakness in the region will affect the
Danish economy.
Investors looking to invest in the region can opt for the
iShares MSCI Denmark Capped Investable Market Index Fund
(
EDEN
).
The fund climbed 20% in the past year, also beating SPY. The fund
offers a concentrated play in Denmark stocks with almost 63.3% of
the asset base in the top ten holdings (
Access the Least Corrupt Countries with These
ETFs
).
Denmark ETF in Focus
The fund invests its $3.5 million asset base in a portfolio of
37 stocks and charges investors a fee of 53 basis points. Among
sectors, Health Care, Industrials, Financials and Consumer
Staples influence the performance of the ETF with a double-digit
allocation.
For individual holdings, Novo Nordisk constitutes the top spot
in the basket with the largest share at 22%, while the next two
spots - Danske Bank and Carlsberg - make for a combined 13.3%
share combined.
The fund charges an annual fee of 53 bps from investors
putting it in line with other ETFs targeting the region.
Bottom Line
Many investors focus in on U.S. stocks, and in bull market
times like this, it is easy to see why. However, big gains can
still be had beyond our shores, and the aforementioned three
foreign ETFs are a testament to this, even when everyone seems to
be zeroed in on domestic holdings.
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ISHARS-MS DNMRK (EDEN): ETF Research Reports
ISHARS-AUSTRAL (EWA): ETF Research Reports
ISHARS-SWEDEN (EWD): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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