The global financial turmoil severely tested the mettle of
many a developing economy. While many proved their resilience,
challenging the foundation of many mature economies, others were
stretched considerably to survive the crisis.
With an improving global outlook and some countries gaining
strength in 2012, there were many country-specific
delivering double-digit gains to the investors.
The markets in 2013 started on a great note with many country
ETFs beginning the year with a bang. In this context the Vietnam
ETF has turned out to be a surprise package for investors.
Market Vectors Vietnam ETF (
has returned over 23% in the year-to-date period, and could
continue with its solid performance going forward (
A Trio of Top Emerging Market ETFs for 2013
However, there are some countries which failed to impress from
the very start. Below we are highlighting three such nation ETFs
which have disappointed investors this year:
South Korea, Asia's fourth largest economy and one of the most
stable, showed its strong resilience to the global turmoil and
turned out to be one of the best performing regions in 2012 (
South Korean ETFs: Best Way to Play Asia?
However, in the New Year, when the other economies gained
strength, South Korea gives the impression that the economy may
be lagging somewhere. The ETF tracking the region had a poor
start to 2013 (
Are Korean ETFs In Trouble?
South Korea's housing market is facing a difficult time and
could be headed for a bit of trouble thanks to unfavorable
demographics. The property market appears to be pinned down by
many structural tribulations like an aging population and
retiring baby boomers on top of the low-growth environment.
The economy which was already facing troubles from the
Euro-zone crisis due to poor exports has been made more
vulnerable by the rising won. This makes exports even more
expensive. Also, with a depreciating yen supported by economic
reforms in Japan, the situation is further aggravated as Japan
comes into direct competition with the nation (
South Korea ETF Investing 101
In this sluggish growth environment, ETFs tracking the region
are bound to deliver negative gains to an investor.
iShares MSCI South Korea Capped ETF (
, which offers a broader exposure to South Korean equities, ended
2012 at a solid gain of 19.9% (
Top Ranked South Korea ETF in Focus
However, in 2013, the ETF just does not appear to be in good
shape as revealed by its year-to-date negative return of 8%.
The fund provides exposure to 106 South Korean stocks while
investing $3.2 billion in the portfolio. The volume levels are
seen at more than 1 million shares a day.
Samsung plays a very dominant role in the fund's performance
as the fund has assigned a healthy 21.6% of its asset base to the
company. Samsung continues to gain ground in the smartphone
business and is in neck-to-neck competition with Apple's iPhone
in terms of sales.
Attributable to rising demand for Samsung products and Apple's
earnings miss, the company continues to gain strength (
3 Apple Proof ETFs
Despite Samsung's solid performance in the near term, the ETF
does not seem to be in top form. Other top positions have been
allocated to Hyundai and Posco. The fund charges an expense ratio
of 61 basis points.
Among sector allocation, Information Technology, Consumer
Discretionary, Financials, Industrials and Materials get
double-digit allocation in the fund.
Labor unrest and strikes in the mining and transportation
industry of South Africa continue to hamper its growth prospects
and its currency, the rand. Resource-rich South Africa is
arguably the world's largest producer of precious metals and
likewise its currency, the rand, is regarded as a commodity
currency exhibiting high volatility (
Time to Exit South Africa ETF?
Due to a protracted strike in the mining industry, the
country's economic output and its growth, which has already been
impacted by the Euro-zone crisis, come into limelight again. The
mining industry makes up for 60% of the country's exports which
implies that the country's growth in highly dependent on the
The curtailed output in the mining industry also leads to a
higher trade deficit which again puts a question on the country's
currency prospects. Apart from this, a high unemployment rate in
the country also remains a major concern as it currently stands
In such a scenario,
iShares MSCI South Africa ETF (
turned out be one of the worst performing country ETFs to start
the year. The fund has delivered a negative return of 5.7% year
EZA is one of the main sources to play the South African
economy and provides exposure to 51 securities. The fund manages
an asset base of $506 million and charges investors 61 basis
points in fees annually.
At 17.68%, EZA allocates a hefty proportion to the Mining
sector occupying the third position in sector allocation after
Financials (26.6%) and Consumer Discretionary (17.7%) (
Top Mining ETFs in Focus
The fund also has not been able to do much in minimizing the
stock-specific risk as nearly 55% of the asset base goes towards
the top ten holdings. Among individual holdings, MTN Group,
Naspers and Sasol occupy the top three positions in the fund.
Malaysia is one of the regions which showed its resilience to
the global slowdown attributable to increased private consumption
and investment. Private consumption and investment recorded
growth of more than 20% in the first three quarters of the year (
Can Anything Stop These Southeast Asia ETFs?
Despite healthy domestic demand and an improving prospect for
GDP growth in 2013, Malaysian ETFs have not found it easy this
The primary reason behind this underperformance is political
concern looming large on Malaysian equities. The market has
weakened on the speculation that Prime Minister Najib Razak's and
his party will face a more uncertain outcome for this year's
This led to a fall in prices of Malaysian equities which
consequently affected the performance of the Malaysian ETF.
iShares MSCI Malaysia ETF (
which provides exposure to 43 securities dived down 5.1%, turning
out to be one of the worst performing country ETFs to start the
Malaysia ETF: the Perfect Emerging Market
The fund manages an asset base of $887.4 million and charges a
fee of 51 basis points. The fund has a concentrated bet on the
top ten holdings as 54.1% of the asset base goes towards
Among sector holdings, the highest weighting go to Financials
with 30.6% of asset base invested in it. Industrials,
Telecommunication, Consumer Staples and Consumer discretionary
also get double-digit allocation in the fund.
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ISHARS-MALAYSIA (EWM): ETF Research Reports
ISHARS-S KOREA (EWY): ETF Research Reports
ISHARS-S AFRICA (EZA): ETF Research Reports
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