Are Foreign Markets Too Risky Right Now?

Zacks

While stock trading in the U.S. hasn’t exactly been great the past few weeks, it has been downright brutal in markets beyond American shores. Major indexes in foreign nations were hit hard by tapering talk and strong dollar fears, pushing many to abandon these markets for the time being.

Over the past month, losses for SPY were about 0.2%, while the Dow, as represented by DIA, actually added about 0.4% in the time frame. This is in sharp contrast to many other markets around the globe, including the following nations:

 

Country

ETF

1 month return

Indonesia

EIDO

-15.8%

Philippines

EPHE

-16.6%

Thailand

THD

-16.8%

Turkey

TUR

-19.8%

But before you think that these issues were exclusive to risky emerging markets, consider the following crashes in developed markets as well:

 

Country

ETF

1 month return

Singapore

EWS

-10.4%

New Zealand

ENZL

-10.6%

Japan (currency hedged)

DXJ

-11.1%

Australia

EWA

-14.5%

Clearly, the pain was pretty universal, although you can obviously make some generalizations about the recent trend. The worst of it seems to have been in the Asia-Pacific region, with the outlier being Turkey due to obvious reasons (see Turkey ETF Crashes After Istanbul Protests).

Still, this seems to be a bit of an overreaction, especially given some of the recent data points in the U.S., and how volatile Treasury bills were after the initial talk of tapering. With these kind of data points, I question the nerve of the Fed to actually follow through on tapering bond purchases later this year, suggesting that the QE fueled bull may have a bit longer to run.

But what do you think regarding this little-talked about crash?

Are you abandoning foreign markets for now, or are you buying international securities on the dip?

Let us know in the comments below!

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