Country ETFs All Over Map

ETFZone

Investors have long used country ETFs to try to outperform the global market. If turmoil offers opportunity in this asset class, then opportunity clearly abounds.A year ago we saw Spanish unemployment, chaos in Thailand and an earthquake/tsunami in Chile. That backdrop now seems quaint. Spanish unemployment has climbed higher still, chaos reigns in multiple oil-producing countries far more crucial than Thailand, and a momentous earthquake jarred Japan's mighty auto plants.ETFs provide the ideal investment vehicle for targeting a country. Built around major equity indexes, country ETFs are sufficiently liquid to be useful for short-term trades in choppy markets and sufficiently low-fee to use for long-term passive exposure. Asset allocation rules of thumb are that emerging market ETFs are riskier, more growth oriented and smaller cap than major industrial markets.Country ETF performance over the past year was, as always, all over the proverbial map. This time exporters and commodities rich countries led the way:

View photo

.
Germany (EWG) surprised many and roared ahead on solid manufacturing exports in the midst of European sluggishness, and despite bailing out Greece. Less surprising was South Korea (EWY) which hummed along as an exporter to the US and partner to China. South Africa (EZA) benefited from gold and other metal spikes, as did Australia (EWA). The surprise laggard was Brazil which nevertheless showed solid growth in manufacturing and broad development of natural resources. Chile's (EWC) ability to export fresh produce and mine metals far outshone earthquake damage. Japan (EWJ) has been harder hit by its tsunami due to supply chain disruption and electrical blackouts from the Fukushima nuclear facility.Prudence suggests that Germany has had its day in the sun, and that commodity-driven economies will soon hit a wall of resistance where consumers can pay no more for commodities. Brazil may be the exception, where strong fundamentals have not been reflected in stock returns. Japan was already cheap before the tsunami and is surely oversold. Taiwan is an overlooked play in global export growth.Despite recent remarkable events, economists say country stock markets correlate more today than in past decades. A mainstay strategy is simply to buy and hold countries with stronger-than-average growth prospects, especially when they have been hit hard or have lagged their peers.Annual fees for country ETFs run from about .50% for developed countries to over .70% for emerging countries where inefficient brokerage procedures and government red tape add expense. This is a bargain next to stock-picking mutual funds which charge at least 1% more.In country investing, iShares' MSCI line dominates. It is relatively comprehensive and allows for clean multi-country allocation. Index rules vary such as in smaller countries where MSCI may cap the percentage of any one holding (Israel, Peru) so as not to allow any one company to dominate an index. Some countries have large amounts of common stock locked up by insiders and government agencies. Capital must chase after a small amount of available stock to match an index, driving up the price unreasonably. MSCI will typically institute an "investable market" rule in which only the portion of a company held by independent investors is counted towards the index.MSCI's numerous ETFs for individual countries include:
  • iShares MSCI Australia ETF (NYSEArca:EWA - News), annual fees: 0.59%
  • iShares MSCI Austria ETF (NYSEArca:EWO - News), annual fees: 0.59%
  • iShares MSCI Belgium ETF (NYSEArca:EWK - News), annual fees: 0.54%
  • iShares MSCI Brazil ETF (NYSEArca:EWZ - News), annual fees: 0.74%
  • iShares MSCI Canada ETF (NYSEArca:EWC - News), annual fees: 0.54%
  • iShares MSCI Chile ETF (NYSEArca:ECH - News), annual fees: 0.74%
  • iShares MSCI France ETF (NYSEArca:EWQ - News), annual fees: 0.54%
  • iShares MSCI Germany ETF (NYSEArca:EWG - News), annual fees: 0.54%
  • iShares MSCI Hong Kong ETF (NYSEArca:EWH - News), annual fees: 0.54%
  • iShares MSCI Israel Capped Investable Market ETF (NYSEArca:EIS - News), annual fees: 0.68% (holdings capped at 24%)
  • iShares MSCI Italy ETF (NYSEArca:EWI - News), annual fees: 0.54%
  • iShares MSCI Japan ETF (NYSEArca:EWJ - News), annual fees: 0.54%
  • iShares MSCI Malaysia ETF (NYSEArca:EWM - News), annual fees: 0.54%
  • iShares MSCI Mexico ETF (NYSEArca:EWW - News), annual fees: 0.54%
  • iShares MSCI Netherlands ETF (NYSEArca:EWN - News), annual fees: 0.54%
  • iShares MSCI All Peru Capped Index Fund (NYSEArca:EPU - News), annual fees: 0.63%
  • iShares MSCI Singapore ETF (NYSEArca:EWS - News), annual fees: 0.54%
  • iShares MSCI South Africa ETF (NYSEArca:EZA - News), annual fees: 0.7%
  • iShares MSCI South Korea ETF (NYSEArca:EWY - News), annual fees: 0.7%
  • iShares MSCI Spain ETF (NYSEArca:EWP - News), annual fees: 0.54%
  • iShares MSCI Sweden ETF (NYSEArca:EWD - News), annual fees: 0.54%
  • iShares MSCI Switzerland ETF (NYSEArca:EWL - News), annual fees: 0.54%
  • iShares MSCI Taiwan ETF (NYSEArca:EWT - News), annual fees: 0.7%
  • iShares MSCI Thailand Investable Market ETF (NYSEArca:THD - News), annual fees: 0.68%
  • iShares MSCI Turkey Investable Market ETF (NYSEArca:TUR - News), annual fees: 0.68%
  • iShares MSCI United Kingdom ETF (NYSEArca:EWU - News), annual fees: 0.54%
A handful of other ETFs target major emerging economies:
  • PowerShares India Portfolio ETF (NYSEArca:PIN - News), annual fees: 0.78%
  • Van Eck Market Vectors Brazil Small-Cap ETF (NYSEArca:BRF - News), annual fees: 0.73%
  • Van Eck Market Vectors Indonesia ETF (NYSEArca:IDX - News), annual fees: 0.71%
  • Van Eck Market Vectors Russia ETF (NYSEArca:RSX - News), annual fees: 0.69%
  • WisdomTree India Earnings ETF (NYSEArca:EPI - News), annual fees: 0.88%
Co-founder of indexfunds.com, author of two books on investing, and founder of ETFzone.com, Will has been writing on indexing issues for 8 years. He holds an MBA from the University of Texas at Austin.
View Comments