While the Nasdaq has raced ahead more than 25% this year, many foreign markets have done even better than the leading U.S. index, making foreign ETFs a winning asset class in 2017.
[ibd-display-video id=2411914 width=50 float=left autostart=true] The majority of top-performing ETFs track emerging economies, but a few developed-country funds have climbed about as much. Thus, VanEck Vectors Vietnam ( VNM ) is on par with iShares Italy MSCI ( EWI ).
Performance is acutely strong in some leveraged ETFs, cap-specific or sector-specific funds. But as far as country pure-plays go (excluding thinly traded ETFs), there have been plenty of winners abroad.
IShares MSCI China ( MCHI ) is up about 45% this year and has outperformed its cousin, iShares China Large-Cap ( FXI ). The latter - one of the most widely held foreign ETFs, with $3.5 billion in assets - is up about 29% through Dec. 6.
The main difference is, of course, that China Large-Cap owns 50 stocks with the highest market capitalization, while MSCI China owns 153 stocks that range from small caps to big caps. Also, iShares Large-Cap is more heavily weighted in financials (nearly 50% of the portfolio); MSCI China is nearly 41% invested in technology companies and 23% in financials. These funds are heavy in one or two sectors, with nearly every other sector accounting for less than 10% of each portfolio.
Yet the charts of both ETFs are remarkably similar. Both had breakouts in February that kicked off their long advances. Both held above the 50-day moving average through their runs, but slipped below that key level last week. That signals a potential shift in direction.
Two India ETFs also share similar-looking charts and performance, both up around 28% in 2017. IShares MSCI India ( INDA ) and iShares India 50 (INDY) have had a quiet second half of 2017, as gains in the first half have kept the ETFs among the year's best. Both India ETFs broke out of bases in February and saw their best gains through July.
IShares MSCI South Korea Capped (EWY) is trading near all-time highs, unshaken by the threat of war with nuclear-armed North Korea. The ETF made its first important move in March, breaking out to new highs. It's remained in an overall uptrend and is currently testing support at its 50-day line. Its main holding is electronics and industrial giant Samsung.
Also in Asia, iShares MSCI Singapore Capped (EWS) consolidated in August and broke out to new highs Oct. 13, which rejuvenated the ETF's 2017 run. It relies heavily on financials and real estate, which combine for about 60% of holdings.
IShares MSCI Hong Kong (EWH) traces a chart similar to the top China ETFs; it also has fallen below the 50-day line this week. More than 25% of the fund is in real estate equities, tapping a crowded property market.
Only 75% of VanEck Vectors Vietnam is made up of Vietnam-based companies, with the rest having at least 50% of sales or assets in Vietnam. Up about 27% this year, the ETF has had its steepest gains since it broke out past a 15.30 buy point in October, surging as much as 14% from that entry.
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Europe has its share of success, thanks in part to favorable currency exchange rates and a mending economy in the European Union.
IShares MSCI Poland Capped (EPOL) has been range bound since late August, but a superb performance in the first half of 2017 left the fund with a year-to-date gain of around 45%. IShares MSCI Italy Capped broke out March 16 and now is forming its third base this year. The sum of its patterns and rallies have combined for a 28% gain in 2017.
IShares MSCI Austria Capped (EWO), iShares MSCI Netherlands (EWN) and iShares MSCI France (EWQ) have been consolidating since autumn. All three had their most productive months in the first half of 2017. Although their shares are mainly going sideways, they have given up practically none of their gains.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
