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5 Best ETF Areas of March

Sanghamitra Saha

After a superb Trump rally in the first two months of 2017, investors must be interested in knowing how the market performed in the third month of the year. As many feared, the market lost some steam in March with the S&P 500-based ETF SPDR S&P 500 ETF SPY declining about 1.7% and Dow Jones based ETF SPDR Dow Jones Industrial Average ETF DIA shedding over 2.2%.

Only Nasdaq-100 based ETF PowerShares QQQ ETF QQQ,which has a considerable tilt toward tech stocks, survived the blow and tacked on 0.7% gains. Uncertainties over the pro-growth policy agenda of president Trump, especially after the failure of Health Care plan, were the main reason why the key equity indices dived.

Still, there are certain corners of the broader investment world that fetched strong returns even in this downbeat market. Below we highlight five such winning ETF zones that gained 8% or over in March. Returns are as per xtf.com.

Biofuel – ELEMENTS MLCX Biofuels Exchange Series TR ETN FUE – Up 12.2%

Hopes of a change in the biofuel mandate helped the fund in March. Expectations that President Trump will launch US biofuels reforms boosted demand for ethanol, derived mainly from corn, and biodiesel, which is a derivative of vegetable oils.

Spain – SPDR MSCI Spain StrategicFactors ETF QESP – Up 11.0%

Economic developments are looking up in Spain lately. The country’s economy minster recently expressed optimism by seeing growth to surpass 2.5% for the coming two to four years. The Spanish economy grew 0.7% in each of Q3 and Q4 of 2016 (read: Why Did International ETFs Outperform in March?).

For the full year, growth was 3.2%, marking the third annual expansion in a row. The growth was higher than that of the U.S. and the full of Euro zone. The S&P also upgraded its rating on Spain's sovereign credit to "positive" from "stable."

If this was not enough, Spain's minority government revealed a pay hike for public employees and announced a boost in social spending in a draft budget for 2017 on March 31. The leaving of the stringent austerity era indicates a bright future for the Spanish economy.

The other two Spanish ETFs, namely iShares MSCI Spain Capped EWP and Deutsche X-trackers MSCI Spain Hedged Equity ETF DBSP also added 9.2% and 8.2%, respectively in March.

Cocoa – iPath Bloomberg Cocoa SubTR ETN NIB – Up 10.6%

Expectedly enough, cocoa exchange products like NIB and iPath Pure Beta Cocoa ETN CHOC (up 9.2%) were steady in March probably due to the intervention of the Coffee and Cocoa Council (CCC) marketing board to shore up struggling prices.

Higher global cocoa supplies have weighed on cocoa prices lately. To contain the price decline, the Council had to use a considerable portion of the stabilisation fund resources. This effort must have restored the price of the commodity in March despite a bleak outlook.

China – KraneShares Zacks New China ETF KFYP – Up 8.7%

China stocks saw a stellar start to 2017. The tumultuous 2016 ended decently for the Chinese economy on higher consumer spending. China's GDP expanded 6.8% year over year in Q4, surpassing expectations of 6.7%. This was the highest clip of expansion since the fourth quarter of 2015.

The all-important manufacturing sector picked up. Most importantly, the government has been pretty proactive on demographic and economic reforms. This has probably put KFYP, with a focus on Five-Year plans, on investors’ radar (read: Investing in China in the Age of Trump (and Beyond)).

Mexico – iShares MSCI Mexico Capped EWW – Up 8.2%

Mexico has so far been deemed as a Trump-unfriendly investment due to his plans of building a wall along the border as part of his immigration strategy and making an unwilling Mexico pay for it. Apart from the wall issue, restriction on outsourcing makes Mexico ETFs more vulnerable (read: Foreign ETFs to Win or Lose on Trump Victory).

However, one of U.S. President Donald Trump's protectionist trade advisers – Peter Navarro – delivered some peacemaking comments about a coalition with Mexico. He wants the two countries and Canada to build “a regional manufacturing ‘powerhouse’ with stricter rules of origin.”

His conciliatory tone meant that there is no huge risk to the 23-year-old NAFTA trade agreement. This probably helped the Mexico ETF in March (read: Trump Trade Advisor's Comments Boost Mexico ETFs).