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Who Wins the 2018 World Cup of ETFs?


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The 2018 World Cup is starting today in Russia, with the host nation taking on Saudi Arabia. The biggest sporting event on planet will heat up over this month, with the champion being crowned on Jul 15, at the Luzhniki Stadium in Moscow.

The mega football event would drive economic growth across continents, especially in industrial spaces such as media, advertising, restaurants, hotels and airlines. Thanks to this, many investors are interested in betting on those countries that could mint money from this month-long event (read: 6 ETFs to Score High from World Cup Spending Spree ).

And the proliferation of ETFs makes this possible as there is now a huge number of country ETFs, which could help us to find out the one that would emerge as the winner during the 2018 World Cup event.

Those charged up for the tournament can take a shot at ETF investing. For the love of the game, we have broken down the nations into their respective World Cup groups and highlighted the most popular ETF tracking each nation. Much like the real World Cup, two nations from each group will advance to the next round.

Fortunately, all the groups have at least two nations that have ETFs making the game easier and the rules straight. If there is a tie among ranks, we will consider the three months performance in selecting the ETF qualifying for the next round.

Group A

Winner : Saudi Arabia KSA - Zacks ETF Rank #3 (Hold)
Runner Up : Russia RSX - Zacks ETF Rank #3
Third Place : Egypt EGPT - Zacks ETF Rank #5 (Strong Sell)
Uruguay - No ETF tracking this nation

Russia and Saudi Arabia advance in this group, leaving Egypt with its Rank #5 in the dust. Post shootout, KSA gets the top spot as it has outperformed RSX over the past three months by a wide margin.

Group B

Winner : Portugal PGAL - Zacks ETF Rank #3
Runner Up : Spain EWP - Zacks ETF Rank #3
Morocco - No ETF tracking this nation
Iran - No ETF tracking this nation

While there are only two representatives - both Zacks Ranked #3 - in this group, there is a tie. Thus, looking at the three-month performances, Portugal comfortably beats Spain.  

Group C

Winner : France EWQ - Zacks ETF Rank #2 (Buy)
Runner Up : Australia EWA - Zacks ETF Rank #3
Third Place : Denmark EDEN - Zacks ETF Rank #3
Last : Peru EPU - Zacks ETF Rank #4 (Sell)

France with a Rank #2 easily wins in this group and Peru having a Rank #4 comes last. There is a tie for the second and third spots between EWA and EDEN having a Zacks Rank #3. Australia edges out Denmark in terms of the trailing three-month performances, shedding 2.7% compared with a loss of 3.4% for EDEN.

Group D

Winner : Nigeria NGE - Zacks ETF Rank #5
Runner Up : Argentina ARGT - Zacks ETF Rank #5
Iceland - No ETF tracking this nation
Croatia - No ETF tracking this nation

Since there is a tie, with both ETFs Ranked #5, we have looked at the three-month performances. Here, Nigeria beats Argentina by a wide margin.

Group E

Winner : Switzerland EWL - Zacks ETF Rank #3
Runner Up : Brazil EWZ - Zacks ETF Rank #3
Costa Rica - No ETF tracking this nation
Serbia - No ETF tracking this nation

EWL advances to the group, losing much less than EWZ in the trailing three-month period.

Group F

Winner : South Korea EWY - Zacks ETF Rank #1 (Strong Buy)
Runner Up : Germany EWG - Zacks ETF Rank #2
Third Place : Sweden EWD - Zacks ETF Rank #3
Last : Mexico EWW - Zacks ETF Rank #4

This was an easy group as the countries easily advanced according to their Zacks Rank (read: FIFA Frenzy Puts Spotlight on These Stocks and ETFs ).

Group G

Winner : Belgium EWK - Zacks ETF Rank #2
Runner Up : England EWU - Zacks ETF Rank #3
Panama - No ETF tracking this nation
Tunisia - No ETF tracking this nation

This was another easy group with EWK and EWU as the only representatives. We have used British ETF (EWU) as a proxy for England that has a Zacks Rank #3, trailing the Buy-rated Belgium.

Group H

Winner : Japan EWJ - Zacks ETF Rank #1
Runner Up : Poland EPOL - Zacks ETF Rank #3
Third Place : Colombia GXG - Zacks ETF Rank #4
Senegal - No ETF tracking this nation

Another easy group, Japan advances with Rank #1 followed by Poland and Columbia.

Round of 16

For the 16 remaining country ETFs, we have put them in slots much like the World Cup bracket. The Winner of Group A plays the Runner-Up in Group B on one side of the bracket, and the runner-up in Group A plays the Winner in Group B on the other side. The winner of each group plays the runner-up of the following group alphabetically (winner C plays runner-up group D, winner E plays runner up F and so on), while the runner-up in each group plays its counterpart winner (winner Group D plays runner-up Group C, winner group F plays runner-up group E and so on).

We use the same process that we did in the first rounds, focusing on the Zacks ETF Rank and the trailing three-month performances to determine the winners:

Saudi Arabia vs. Spain : Both the ETFs currently have a Zacks Rank #3 so we look at the three-month performance to break the tie. Saudi Arabia is the topper and advances by virtue of its 8.2% gain in the past three months versus loss for Spain ETF.

France vs. Argentina : France easily beats Argentina thanks to a solid rank of EWQ compared with an unfavorable rank for ARGT.

Switzerland vs. Germany : Germany ETF outranks its Switzerland counterpart, so EWG advances to the next round.

Belgium vs. Poland : Belgium, thanks to its strong ETF Rank, is able to easily outpace Poland and move on to the quarterfinals.

Portugal vs. Russia : Both country ETFs have a Zacks Rank #3, so a look at their performance would help to find the tiebreaker. Portugal easily beats Russia since it posted a 4.1% gain in the three-month period versus a loss of 9.1% for the latter (read: Can FIFA World Cup Give Russia ETFs a Boost? ).

Nigeria vs. Australia :  Australia continues to make a dream run to the quarterfinals thanks to a favorable rank of EWA relative to NGE.

South Korea vs. Brazil : South Korea easily edges past Brazil with its top Rank of #1.

Japan vs. England : Here too, Japan wins outranking England.

Quarterfinals

Among the eight winning ETF teams, the six-month performance was used to decide the winners of remaining matchups that should take the tournament to the semifinals. The winner of one group will play with the winner of the group following numerically. For example, Saudi Arabia will play with France; Germany will face Belgium and so on.

Saudi Arabia vs. France : Saudi Arabia is the winner as KSA has gained 25% over the past six months compared with the 4% gain for EWQ.

Germany vs. Belgium : Here, EWK easily beats EWG with a gain of 1% versus loss of 1.4% for the latter.

Portugal vs. Australia : Though both funds have been trending upward over the past six months, Portugal ETF outperformed and advanced to the semifinals with a gain of 9.1% over the past six months.

South Korea vs. Japan : In a close tie between the two, EWJ edges out EWY by a thin margin, gaining 2.3% vs. 2% for the latter.

Semifinals

For the final four, we look at the one-year performance to see which has the maximum momentum heading into the World Cup of ETFs. In the matchups, we have Saudi Arabia and Belgium on one side, and Portugal and Japan on the other.

iShares MSCI Saudi Arabia ETF KSA vs. iShares MSCI Belgium ETF EWK

For this ETF faceoff, Saudi Arabia is represented by KSA and EWK is a Belgium player. Below, we have taken a closer look at these funds before deciding on the winner:

KSA: This fund offers exposure to the Saudi Arabian stock market, which has historically been closed to foreign investors. Holding 72 stocks in its basket, it has a large concentration on the top three firms. Further, financials and materials take the largest chunk from a sector look with 40.5% and 33.8% share, respectively. The fund has a decent level of $265.3 million in AUM and charges 74 bps in annual fees. It has surged 28.9% in a year.

EWK: This fund offers exposure to a broad range of 46 companies in Belgium with heavy concentration on the top two firms. From a sector look, consumer staples and financials take the top two spots with one-fourth share each. The ETF has amassed $65.9 million in its asset base and charges 49 bps in annual fees. It has added 4.7% in a year.

Winner : The Saudi ETF clearly wins and advances to the final round to take on the winner of the Portugal vs. Japan matchup.

Global X MSCI Portugal ETF PGAL vs. iShares MSCI Japan ETF EWJ

For this faceoff, PGAL represents Portugal and Japan is represented by EWJ. Below, we take a closer look at these funds before deciding on the winner:

PGAL - This ETF invests in 23 largest and most-liquid companies in Portugal with higher concentration on the top two forms with nearly 22% share each. Utilities is the top sector accounting for 30.9% share, followed by energy (21.7%) and materials (16.6%). The fund has accumulated $49.6 million in its asset base while charges 58 bps in annual fees. The fund has gained 15.2% in a year.

EWJ - This is the most popular ETF tracking the Japanese economy with AUM of $20.2 billion. Holding 322 securities in its basket, it is slightly skewed toward the top firm at 4.2% while other firms do not account for more than 2% of assets. Further, industrials is the top sector with 21% share while consumer discretionary and information technology round off the next two. Expense ratio comes in at 0.49%. EWJ is up 12.7% in a year (read: Focus on Small Cap ETFs for Japan Exposure ).

Winner : Portugal ETF wins by a thin margin and will again matchup with the Suadi ETF for the championship.

Third Place Game and World Cup Championship

For the third place game and championship, we are looking to see which ETF has performed the best since the last World Cup ended on Jul 13, 2014 in Brazil. The national ETFs with superior performance will be crowned the winner in their respective matches:

Third Place Game: In the third place battle, Japan finishes ahead of Belgium owing to its long-term performance strength, and captures the third place on a 27.1% price gain since the end of the last World Cup versus 20.7% for EWK.



The Championship: We have the Portuguese taking on the Saudis. The Saudi Arabia ETF is the clear winner since the end of the last World Cup, having gained 27% compared to a loss of 18.6% for the Portugal ETF.



Result

Based on our ranking system and recent performances, it looks like iShares MSCI Saudi Arabia ETF (KSA) will lift this year's trophy for World Cup in ETFs. While it was exciting and fun to make passes toward the goal of deciding the ETF winner, we expect the twists and turns in the FIFA tournament to lead to some dramatic moves in the investment world too.

Our process of deciding on the winners also indicates that many country ETFs have been performing strongly and could be poised for further gains in the future as well.

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ISHARS-JAPAN (EWJ): ETF Research Reports

ISHARS-BRAZIL (EWZ): ETF Research Reports

ISHARS-FRANCE (EWQ): ETF Research Reports

GLBL-X/F COL 20 (GXG): ETF Research Reports

VANECK-EGYPT (EGPT): ETF Research Reports

ISHARS-AUSTRAL (EWA): ETF Research Reports

GLBL-X MS NIGRA (NGE): ETF Research Reports

ISHARS-MS POLND (EPOL): ETF Research Reports

ISHARS-MEXICO (EWW): ETF Research Reports

ISHARS-GERMANY (EWG): ETF Research Reports

ISHARS-SPAIN (EWP): ETF Research Reports

VANECK-RUSSIA (RSX): ETF Research Reports

GLBL-X MS ARGEN (ARGT): ETF Research Reports

ISHARS-UTD KING (EWU): ETF Research Reports

ISHARS-MSCI PER (EPU): ETF Research Reports

Eni SpA (E): Free Stock Analysis Report

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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 Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: EWJ , EWZ , EWQ , GXG , EGPT



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