3 Single Country ETFs Still Beating The S&P 500 Index (EWA, EWD, EDEN)
Many investors are finally starting to believe that the U.S. market is back on track. After all, the DJIA is at an all-time high, while the housing and jobs markets are also performing well to start 2013.
It appears that the Federal Reserve’s measures along with decent U.S. data is finally pushing stocks higher, rescuing investors from a disappointing start to the year. And with a lack of big hurdles on the horizon, some are predicting that this trend will continue as we head into April as well.
As a testament to this bullish attitude, investors have seen the benchmark S&P 500, as represented by the SPDR S&P 500 ETF (NYSEARCA:SPY), move continually higher and within striking distance of all time highs. In fact, the ETF’s one year performance is already impressive, having added over 13.8%.
Still, while many investors may be focused in on the American market, there are plenty of other developed nations that have actually beaten out the U.S. in the past year. These markets may often be overlooked, but they are clearly capable of big gains as well.
So for investors seeking foreign plays that are doing well in this market environment, a closer look at any of the following three ETFs could be a good idea. This is not only from a diversification perspective, but quite possibly if these trends continue, a return look as well:
Australia is one such developed economy which is rich in natural resources, has a better fiscal position than many other developed economies, and is (relatively) close to booming Asian-Pacific markets (Australia ETF Investing 101).
The economy posted a solid GDP growth rate of 3.2% in 2012 and has not seen a recession for 21 years. Australia, a country blessed with immense mineral wealth, has been enjoying the boom in the mining sector due to increased demand for iron ore and coal from emerging economies.
However, the slowdown in the Chinese economy impeded growth of the mining sector as China accounts for two-thirds of Australia’s iron ore exports and thereby plays an influential role in the economy’s performance. But with China showing signs of rebounding, it seems that the mining sector in Australia will regain strength and commodity prices will again shoot up.
So investors looking to play this trend in the Australian economy can look to invest in one of the most popular options in the ETF industry. iShares MSCI Australia Index Fund (NYSEARCA:EWA) portfolio of 71 stocks represent some of the largest Australian-listed securities, and easily the most popular choice in teh Aussie ETF market (Australia ETFs to Play the Coming Shale Boom)
EWA has managed to beat SPY in the one year period with a return of 23.5% while its 2012 gains stand at 21.5%.
Australia ETF in Focus
This is one of the oldest ETFs to tap the Australian equity market. The fund manages an asset base of $2.7 billion and trades with volumes of more than one million shares a day. In spite of providing exposure to a large basket, the fund has 60.9% of assets invested in the top ten choices.
While many investors might expect the ETF to be heavy in materials firms,the fund, like many other country-specific ETFs,has a heavy exposure level to the financial sector of the economy. Financials dominates 49.3% of the performance of the ETF while another 19.8% goes to the materials sector.
Among individual holdings, however, the highest allocation goes to the mining giant BHP Billiton (10.84%) and financial behemoth Commonwealth Bank of Australia (10.63%). The fund charges a fee of 71 basis points annually.
The Swedish economy emerged from the financial crisis as one of the strongest in Europe. The strength of the economy lies in low levels of public debt and a current account surplus (Nordic ETF Investing 101).
Although the economy has somewhat slowed down in the fourth quarter of 2012, it will be able to pick up on the back of more expansionary policies and a stabilizing export market.
However, rising unemployment levels remain a matter of concern for the economy. The government expects Sweden’s jobless rate to rise to 8.2% in 2012, compared with the previous forecast of 7.5%.
Still, given its overall strength, investors may still want to tap the economy with the iShares MSCI Sweden Index Fund (NYSEARCA:EWD). This is the lone ETF for establishing exposure in Swedish securities directly, holding about three dozen stocks in its portfolio.
The fund’s performance has been quite impressive in the year-to-date period, while gains over the one year time frame have been solid at 18.1%, easily beating out SPY’s returns in the same time frame.
Sweden ETF in Focus
EWD manages an asset base of $413.3 million of which the ten largest holdings make up 61.3%. Ericsson LM-B, Hennes & Mauritz, and Nordea Bank form the top line of the fund. Among sector holdings, industrials and financials play an influential role in the performance of the ETF with a share of 30.6% and 28.5%, respectively.
The fund also yields an impressive dividend of 2.63% per year, greatly easing the 51 basis point expense ratio for investors.
Denmark appears to be slowly recovering from the financial crisis and the economy is expected to regain some strength and show improvement in 2013. The unemployment level in the economy is also expected to come down going forward.
The country is expected to have healthy public finances, which would keep the interest rates down, while inflation has also been moderate. Further, Denmark enjoys significant account surplus, foreign-exchange reserves and a favorable public debt situation.
However, the Euro-zone accounts for a major portion of Denmark’s exports and weakness in the region will affect the Danish economy.
Investors looking to invest in the region can opt for the iShares MSCI Denmark Capped Investable Market Index Fund (BATS:EDEN). The fund climbed 20% in the past year, also beating SPY. The fund offers a concentrated play in Denmark stocks with almost 63.3% of the asset base in the top ten holdings (Access the Least Corrupt Countries with These ETFs).
Denmark ETF in Focus
The fund invests its $3.5 million asset base in a portfolio of 37 stocks and charges investors a fee of 53 basis points. Among sectors, Health Care, Industrials, Financials and Consumer Staples influence the performance of the ETF with a double-digit allocation.
For individual holdings, Novo Nordisk constitutes the top spot in the basket with the largest share at 22%, while the next two spots – Danske Bank and Carlsberg – make for a combined 13.3% share combined.
The fund charges an annual fee of 53 bps from investors putting it in line with other ETFs targeting the region.
Many investors focus in on U.S. stocks, and in bull market times like this, it is easy to see why. However, big gains can still be had beyond our shores, and the aforementioned three foreign ETFs are a testament to this, even when everyone seems to be zeroed in on domestic holdings.