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4 Foreign ETFs That Gained Double-Digits in May

Sweta Killa

May turned out another profitable month for the global stock markets after trumping political worries. World stocks logged in the seventh consecutive monthly gains and the longest monthly winning streak in over a decade.

In fact, international equities have outperformed with Vanguard FTSE All-World ex-US ETF VEU, which targets the international equity market, returning 3% in May compared with a gain of 2.2% for iShares MSCI ACWI ETF ACWI, which targets the global stock market including the U.S (read: ETF Asset Flow of May: Foreign Wins, U.S. Loses).

The outperformance were credited to a pickup in economic activity in many parts of the world, jump in commodity prices, robust corporate earnings and improving global sentiments, especially after the French election in early May. Additionally, the Trump upheaval pushed investors to foreign stocks from the U.S.

While there have been winners in many corners of the world, we highlight five ETFs that led the way higher last month with double-digit gains. Further, these could be strong momentum plays heading into June, especially if the trend remains the same.

Global X MSCI Portugal ETF PGAL

Accelerating and sustaining economic growth is leasing new life to the Portuguese stock market, which was badly hit by the 2010–13 debt crisis. Portuguese economic growth is growing faster than the forecast with first-quarter growth of 2.8%, the strongest increase in a decade. It is expected to grow more than 3% in the second quarter and more than 2% for the whole of 2017 versus Lisbon's official growth forecast of 1.8%.

As a result, the only Portugal ETF targeting the nation climbed 11.3% in May and tracks the MSCI All Portugal Plus 25/50 Index. Holding 23 stocks in its basket, the product fund is heavily concentrated on the top two firms with a combined 42.2% share while other securities hold less than 6.2% of assets. Utilities, energy and materials are the top three sectors. The fund has amassed $43.5 million in its asset base while volume is light at 30,000 shares. Expense ratio comes in at 0.61%. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook (read: What Makes These Europe ETFs Still Roaring).

First Trust South Korea AlphaDEX Fund FKO

South Korean stocks scaled multiple record highs in May buoyed by hopes of economic stimulus after the presidential election, expectations of stronger economic growth, and healthy corporate earnings. In addition, the nation’s central bank kept its rates steady boosting confidence in economic growth. While all the South Korean ETFs performed better, FKO was the real winner gaining 10.1%.

This fund employs an AlphaDEX methodology and ranks stocks in the space by various growth and value factors, eliminating the bottom-ranked 25% of the stocks. This is easily done by tracking the NASDAQ AlphaDEX South Korea Index and the approach results in a basket of 51 stocks that are widely spread out across various components with each security holding less than 3.6% of assets. From a sector look, industrials, financials, consumer discretionary and materials occupy the top positions with a double-digit exposure each. FKO is an unpopular and illiquid option with AUM of only $5.49 million and average daily volume of around 11,000 shares. It charges 80 bps in annual fees and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.

WisdomTree Europe Domestic Economy Fund EDOM

Europe was the hot spot for investors last month and gained increased momentum after the French election. This is because the optimism surrounding Macron’s victory has erased fears of a populist rise in Europe – a major geopolitical tension that has engulfed the continent for most part of this year. In particular, EDOM providing exposure to companies that are most sensitive to economic growth and derive more than 50% of their revenues from the Eurozone, surged 10.7% last month (read: 5 European ETFs Soaring on French Election Results).

It follows the WisdomTree Europe Domestic Economy Index, holding 214 stocks in its basket with none accounts for more than 2.04% of assets. About 29% of the portfolio is allotted to financials while industrial and consumer discretionary round off the next two spots with over 20% share each. EDOM is often overlooked by investors as depicted by its AUM of $2.8 million, a wide bid/ask spread and a paltry trading volume of 2,000 shares. It charges 58 bps in annual fees and has a Zacks ETF Rank of 2.

WisdomTree China ex-State-Owned Enterprises Fund CXSE

Chinese stocks have also performed well amid persistent worries over tighter regulation and economic growth. The strength came from companies that belong to a new and developed China (that has stepped up efforts to upgrade manufacturing, and research and development) rather than the traditional government-run companies such as banks, energy and telecom firms.  And CXSE is the biggest beneficiary of this trend, having gained 10% last month. This is because the fund offers exposure to targeted Chinese stocks that are not state-owned enterprises (see: all the Emerging Asia-Pacific ETFs here).

It tracks the WisdomTree China ex-State-Owned Enterprises Index, charging 53 bps in annual fees. Holding 70 securities in its basket, the fund is largely concentrated on the top firm with double-digit exposure while others make up for less than 8.1% share. Consumer discretionary and information technology take the top two spots at 31.1% and 28.9%, respectively, from a sector look, followed by financials (14%) and real estate (10.4%). The product has accumulated $9.7 million in its asset base while trades in a meager average volume of under 1,000 shares. It has a Zacks ETF Rank of 2 with a Medium risk outlook.
 

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