Earlier this week, Transparency International, a politically
non-partisan organization that tracks international corruption
trends, released its annual Corruption Perceptions Index. This
year's rankings include 176 nations and territories ranked on a
scale of zero to 100.
"A country or territory's score indicates the perceived level
of public sector corruption on a scale of 0 - 100, where 0 means
that a country is perceived as highly corrupt and 100 means it is
perceived as very clean,"
according to Transparency International
For investors that frequently play markets outside the U.S.,
corruption rankings are instructive for several reasons. For
example, Argentina ranked 102 in the Transparency International
index. That country's anti-free market principles and proclivity
for nationalization of industry
have put it on the brink of second sovereign debt
default this century
Conversely, all of the countries represented in the Global X
FTSE Nordic Region ETF (NYSE:
) -- Sweden, Norway, Denmark and Finland -- rank near the top of
the corruption index. That is to say they are among the least
corrupt nations in the world. In fact, that quartet accounts for
half of the top eight spots. Maybe it is not surprising that GXF
is up nearly 25 percent this year.
What may come as a surprise to some investors is the
performance of some
that track countries that are well into the bottom half of the
Transparency International Index. Consider the following:
Global X FTSE Greece 20 ETF (NYSE:
By any account, a 15.8 percent year-to-date gain for the Global X
FTSE Greece 20 ETF is a pleasant surprise. Somehow, some way the
ETF is trading higher on Thursday, a day after Greece entered
selective default on its debt obligations.
Remember, the Transparency International survey ranks public
sector corruption. Apparently, Greece is rife with that because
the country occupies the 94th spot in the latest index. That is
down from 80 last year and good enough to make Greece the most
corrupt Eurozone nation in the eyes of Transparency
This is how bad Greece looks: It is tied with Djibouti. In
terms of countries with ETFs that rank close to but ahead of
Greece, Thailand, Peru and China start the list. The corruption
rankings for those nations are nothing to write home about, but
the reality is those economies have far more potential than
Market Vectors Russia ETF (NYSE:
Of the 176 countries and territories that are found on the latest
Transparency International index, Russia is the lowest-rated to
have a corresponding ETF. The "R" in the BRIC acronym is tied for
the 133rd spot with Comoros and Iran, among others. That is not a
complement, but the Market Vectors Russia ETF has found its way
to a gain of 9.1 percent this year.
Russia and corruption meeting in the same sentence is nothing
new. The country is notoriously corrupt and most investors know
that. However, knowledge of corruption does not diminish investor
Arguably, Russia's energy sector is its most corruption-laden
industry group and much of that comes from the government's
heavy-handed approach to how Russian energy firms operate. The
problem is that RSX and the other Russia ETFs are heavily
allocated to the energy sector.
iShares MSCI Thailand Investable Market Index Fund (NYSE:
In the 88th spot, Thailand resides right in the middle of the
corruption index. That seems to have bothered investors little
because the iShares MSCI Thailand Investable Market Index Fund
has gained over 56 percent since 2008 debut. In that time, there
has been bloody political protests and regime change.
Year-to-date, THD has been a stalwart with a gain of over 30
Putting Thailand's ranking into context, there are plenty of
Asian tiger economies tracked by ETFs with worse corruption
rankings. That list includes Indonesia, the Philippines and
Vietnam. Translation: Of the emerging Southeast Asian economies
with corresponding ETFs, Thailand is the least corrupt.
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