Are Emerging Country ETFs Offering An Opportunity Or Signaling A Change?

“Change” is a lot like a pass interference call in American football. The penalty can drastically alter the outcome of the game, but it’s only a “good” call if it helps your team win.

In the 2008 election, independent voters decided that Barack Obama represented a change that they could believe in. Like pass interference, however, the changes appeared to penalize the country more than benefit it. By November 2010, the same independents threw the red “challenge flag” on President Obama’s agenda.

Change is inevitable in the world of investing as well. Different asset classes — stocks, bonds, commodities, real estate — will take the lead for a period. Unique styles like “growth” or “value” come in and out of favor. Most notably, the savviest investment choices this year will almost assuredly be supplanted by hotter ones the next.

For this reason, I spend a fair amount of time checking in on relative strength in the exchange-traded fund universe. I chronicle the assets that have been gaining steam or holding their own, as well as take note of those that may be fading. In this manner, one often uncovers a changing of the guard.

So here’s what captured my attention this afternoon. Stylish single-country emergers like Global X Columbia (GXG), WisdomTree India Earnings (EPI) and iShares MSCI Turkey (TUR) have been veritable gold mines for “transfer-of-capital” believers. Actually… over the last year… all 3 of these stock ETFs have been more profitable than the gold mines; each earned more than Market Vectors Gold Miners (GDX) with 53.3%, 28.2% and 47.2% respectively.

Yet the month-over-month returns are decidedly weak. The table below outlines the particulars:

        1-Month % 1-Year %
Global X Columbia (GXG)   -6.4%   53.3%
iShares MSCI Turkey (TUR)   -2.3%   47.2%
WisdomTree India Earnings (EPI) -3.6%   28.2%
Vanguard Emerging Markets (VWO) -0.6%   19.5%
S&P 500 SPDR Trust (SPY)   2.3%   12.1%


Profit-taking may be the primary culprit for the poor performance relative to benchmarks over the last 30-31 calendar days. If that’s the case, you may see buyers step up to the plate with funds like WisdomTree India(EPI) hitting a 50-day trendline.

EPI 50


On the other hand, is it possible that a common theme is responsible for the pullback? After all, there’s been enormous discussion about the flow of capital from debt-laden developed countries to financially sound developing countries. And some investors have taken advantage of this notion by investing in those Emerging Country ETFs with the heaviest weightings in their respective banks/financial sectors. Indeed, the financial segment represents the largest weighting for Columbia (GXG), India (EPI) as well as Turkey (TUR).

Unfortunately, I don’t yet have an answer. This is one of those “crossroad” instances where it’s too early to tell whether single-country emergers are breaking down or charging back up.

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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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