Single-Country ETFs: The ETF Menu Isn’t Perfect Yet, But We’re Getting There (EWP, EWQ, EWI, TUR, EIS)
Ron Rowland: ETFs give you a better way to invest in many different assets — and especially international markets. Parts of the world that were “off-limits” to individual investors just a few years ago are opening up fast.
Want to invest in China? No problem. Latin America? Take your pick of several good choices. Russia? You can do it. But you’ll still face hurdles in some parts of the world.
Today I’ll tell you about one of them — and reveal an alternate path.
Regions Are Relative
Plenty of ETFs cover various “regions” of the world. Every regional ETF defines its sandbox a little differently, of course. The nations of Asia, for instance, can be split up into developed, emerging, developed minus Japan, Asia with or without Australia, and so on. The same is true for Europe.
This happens because, unlike single nations, regional groupings have a more flexible definition. The same country can fit into multiple regions. As I’ve mentioned before, Turkey is a good example. It sits squarely between Europe and the Middle East.
|Europe is right across that water.|
How about Spain? The nation is certainly a key part of Europe (though some northern European leaders probably wish otherwise right now). Yet the flight from Madrid to Morocco is shorter than one from Spain to Germany.
When I look at a map, I wonder if maybe we should look at the nations surrounding the Mediterranean Sea as a distinct economic region. Not just Europe … not just North Africa and the Middle East … but an area in between.
Yes, they have many differences. But the Med’s blue waters have bound them together for centuries.
Can you name all the nations with Mediterranean shoreline? Start with Spain and go clockwise. Here is the answer:
Spain, France, Monaco, Italy, Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, Albania, Greece, Turkey, Syria, Lebanon, Israel, Egypt, Libya, Tunisia, Algeria, and Morocco. And don’t forget the island nations of Cyprus and Malta.
Get them all? You could also include Gibraltar, which actually belongs to the United Kingdom.
|One sea, many countries|
Quite a list, isn’t it? Some, like war-torn Libya, don’t have much of a stock market. There are some big cultural differences within the region as well. But it doesn’t stop people, goods, services and money from moving across the waves.
As far as I am aware, no ETF or mutual fund defines its focus on the Mediterranean area. There is no shortage of “Europe” funds, of course. But with them, you’ll also find yourself exposed to places like Belgium, Ireland, Denmark, and even Sweden. All nice places, but they aren’t part of the Mediterranean Basin.
|Opposite ends of the region|
North Africa and the Middle East have several regional ETFs, too. But they don’t include Italy or Spain, and have heavy allocations to far-off Gulf states like Dubai and Qatar.
If you want the Med in one package, sorry. You can’t do it … yet. You can, however, get a good start with some ETFs available right now. Single-country ETFs already track seven of the nations on our pop quiz list.
- iShares MSCI Spain (NYSEARCA:EWP)
- iShares MSCI France (NYSEARCA:EWQ)
- iShares MSCI Italy (NYSEARCA:EWI)
- Global X FTSE Greece (NYSEARCA:GREK)
- iShares MSCI Turkey (NYSEARCA:TUR)
- iShares MSCI Israel (NYSEARCA:EIS)
- Market Vectors Egypt (NYSEARCA:EGPT)
In addition, PowerShares MENA Frontier Countries (NYSEARCA:PMNA) has about 18 percent of its portfolio in Egypt stocks and approximately 10 percent in Morocco. PMNA also has a smaller slice of roughly 8 percent in Jordan, which isn’t directly on the Med but isn’t far. The rest of PMNA is dedicated to Gulf states.
Of course, now may not be the right time to buy into these places. The fact that you can invest in a market doesn’t mean you should invest there.
Whether you’re bullish or bearish, though, it’s very nice to have choices. The ETF menu isn’t yet perfect … but we’re getting there.
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended inMaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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