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Best and Worst ETFs of April - ETF News And Commentary

Zacks Equity Research

Despite a dovish Fed session at the end of March, the domestic market could not break all the barriers in April. Instead like the first quarter, international investing was in vogue all through the month. While the top performing ETF of April went on delivering over 40% in return, gains out of SPDR S&P 500 ETF (SPY) were muted at around 2.5%.

Below, we highlight a few of these strong international plays, which may be worth paying attention going forward should the trend seen in April stay in the market for a while.

China

China ETFs have been delivering an all-star performance this year on a policy easing spree. Back-to-back rate cuts and rising hopes for further easing helped Chinese securities to return generously to investors despite a sagging economic growth profile. The space was the showstopper in Q1 and retained its dominance in April too (read: 3 Best Performing ETF Sectors of Q1 2015).

This strong trend has made Global X China Industrials ETF (CHII) the best performer in the month with over 42% gains. Investors should note that if we go by the list of highest returning ETFs of the month, the first few positions are acquired by various China ETFs. Among them, the likes of Global X China Materials ETF (CHIM), Guggenheim China Small Cap ETF (HAO) and iShares MSCI China Small-Cap ETF (ECNS) have returned around 30%.
Brazil

Investors might be surprised to know that Brazil made a place for itself in the toppers’ list last month despite the Petrobras scandal. The largest Brazilian ETF iShares MSCI Brazil Index Fund (EWZ) returned over 21% in the last one month though the fund was flat on a year-to-date basis (read: Petrobras Earnings & Scandal Drag Brazilian ETF Lower).

A dovish Fed, which appears in less hurry to hike rates (as evident from its April meeting) following the setback to U.S. growth, put the strength in the greenback on hold. Added to this, a wave of cheap money in the international nations from Europe to Asia Pacific has lent a hand to the Brazilian stocks.

UAE

April can be easily remembered as the month of rebounding oil prices, which in turn gave a big-time boost to the oil-rich nations in the Middle East. This helped iShares MSCI UAE Capped ETF (UAE) in the month. The fund was up over 19% in the month.

Investors will also be interested to know what the unloved areas were in April. For them, we highlight a few spaces which were hit the most in the month.

Agricultural Commodity

Agricultural commodities are clearly out of investors’ favor this year due to demand-supply imbalances. Even a benign greenback could not help the agro-based futures contracts.
Among the major soft commodity losers, Teucrium Corn Fund (CORN), Teucrium Wheat ETF (WEAT) and iPath Dow Jones-UBS Grains ETN (JJG) were at the front. U.S. corn supplies hit a 28-year high at the end of March.

WEAT and CORN were off 9% and 8.4% respectively while JJG has shed about 5.8% thanks to its focus over corn (45.84%), soybeans (35.38%) and wheat (18.78%). Expectations of faster corn plantings in the Midwest region and favorable weather in the southern Plains wheat belt took corn and wheat futures to a 6-month low on April 27, 2015. So, the declines in the ETFs are self-explanatory.

Homebuilding

Housing recovery suddenly took a turn for the worst as sales of new single-family home in March slipped from the seven-year peak recorded in February. The March data is now the lowest in four months. Analysts believe that sluggish wage growth appears to be having the upper hand over low interest rates somewhat dampening the start of a busy spring selling season.

Though some other indicators including existing home sales and homebuilding confidence data were favorable for the month, the space could not avoid a sell-off. A new homebuilding ETF, ETRACS ISE Exclusively Homebuilders ETN (HOMX), bore the maximum brunt. HOMX was down over 7% (read: Two New Homebuilding ETFs from UBS Hits the Market).

India

After a lofty run for most of the last one year, India ETFs are finally retreating. A host of issues including profit booking, lower-than-expected earnings from several sector majors, a relatively weaker dollar affecting the Indian export sector and issues over minimum alternate tax appear to weigh on Indian stocks.

The Indian tax officials are demanding Minimum Alternate Tax on capital gains over previous years from foreign institutional investors (FIIs). This step seems to add to the dour sentiments over India investing. India ETFs including iShares MSCI India Small Cap Index Fund (SMIN), EGShares India Consumer ETF (INCO) and iPath MSCI India Index ETN (INP) have shed in the range of 5% to 7% in the last one month.

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