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ETFs to Capture Excess Exporting Countries


As global currencies swing, international trade is quickly shifting. With exchange traded funds, investors could capitalize on some countries’ excess trade balance.

There are 36 emerging and developing economies expected to generate a current account surplus, or more exports than imports, this year, according to Bloomberg News.

Asia’s low labor costs help provide the region’s exporters with an edge on the intnerational stage. Singapore is expected to generate a trade surplus of about 20% of its gross domestic product. The iShares MSCI Singapore ETF (EWS) has increased 3.6% over the past week but is down 2.8% year-to-date.

Additionally, Taiwan, a major supplier of information, communications and electronics devices, is expected to produce a surplus of 11% of GDP. The iShares MSCI Taiwan ETF (EWT) , which includes a heavy 59.0% tilt toward the tech industry, is up 6.8% year-to-date.

South Korea also recently posted a record trade surplus in February and is expected to a trade surplus of 7% this year as exports of cars and electronics continues to pick up pace. The iShares MSCI South Korea Capped ETF (EWY) , which includes 36.4% in tech and 16.1% in consumer discretionary, is 4.5% higher year-to-date. Alternatively, if investors are still worried about a strong dollar or weak South Korean won, thee Deutsche X-trackers MSCI South Korea Hedged Equity ETF (DBKO) and the WisdomTree Korea Hedged Equity Fund (DXKW) both hedge against a weaker won currency. Year-to-date, DBKO is up 5.5% and DXKW is 8.4% higher. [Muted Reaction to Rate Cut for South Korea Hedged ETFs]

Looking at Europe, Norway could generate a 10% trade surplus, despite falling oil prices. However, the Global X MSCI Norway 30 ETF (NORW) has weakened 1.0% this year and declined 22.0% over the past year due to its energy exposure, which is 30.9% of the fund’s overall weight.

Even though Switzerland has seen its trade surplus dip from double-digit numbers to a forecasted surplus of 8.3% of GDP as its franc currency appreciates against the euro, the iShares MSCI Switzerland Capped ETF (EWL) has increased 7.3% year-to-date.

Eurozone markets will stand to benefit and see exports rise as the euro currency continues to depreciate, making it cheaper for foreign markets to buy the European goods. Among the largest excess exporters, Netherlands and Germany rank among the top Eurozone countries. The iShares MSCI Netherlands ETF (EWN) has gained 8.4% year-to-date. Additionally, with Germany’s DAX being the best developed market equity benchmark in the world this year, the iShares Currency Hedged MSCI Germany ETF (HEWG), Deutsche X-trackers MSCI Germany Hedged Equity Fund (DBGR) and the WisdomTree Germany Hedged Equity Fund (DXGE) have all jumped over 20% year-to-date. [Explosive Growth for Single-Country ETFs]

For more information on the international markets, visit our global ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.