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International ETFs Win in May

Sweta Killa

May turned out to be a dismal month for global stock markets thanks to escalating trade conflict between the United States and China as well as new tariff threat for Mexico raised global growth worries.

In fact, global stock markets wiped out more than $2 trillion in value last month. However, international equities have performed better with Vanguard FTSE All-World ex-US ETF VEU, which targets the international equity market, shedding 4% in May compared with a loss of 5.2% for iShares MSCI ACWI ETF ACWI, which targets the global stock market including the United States. The outperformance was credited to Trump upheaval that pushed investors into foreign stocks and away from American stocks (read: 4 Sector ETFs Surviving May Swoon).

While there have been winners in a few corners of the world, we highlight four ETFs that stood tall last month. Further, these could be strong momentum plays heading into June, especially if the trend remains the same.

Global X MSCI Greece ETF GREK

Greece stock market has been on a tear on resurgent economy and the ongoing push to offload bad debt on banks’ balance sheets, which have weighed on the country’s recovery for years. The once downtrodden Mediterranean economy is also on track to record the fastest growth since 2007 backed by recovery in consumer confidence to almost pre-crisis levels. Additionally, a big defeat of the ruling leftist coalition in Regional and Euro elections have also added to the strength lately (read: Are Southeast Asia ETFs Better Bets Than China?).

As a result, GREK, which tracks the MSCI All Greece Select 25/50 Index, has climbed 11.7% in a month. It is a home to a small basket of 35 companies with heavy concentration on the top three firms with a combined 32% of assets. Financials takes the top spot at 27% in terms of sector holdings, followed by energy (16%), consumer discretionary (16%), communications (13%) and industrials (10%). The product has amassed $306.4 million in its asset base and trades in solid volume of around 406,000 shares per day. It charges 59 bps in fees per year from investors but has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.

Franklin FTSE Russia ETF FLRU

Russia stocks led the emerging markets last month on hopes of a rate cut by the country’s central bank. The weaker-than-expected GDP growth has raised the speculation for a 25 bps rate cut at the upcoming June meeting and additional 25-50 bps in the second half of 2019. The rate cuts will allow more cheap money flows into the economy, thereby boosting the Russian stock market. While all the Russia ETFs performed better, FLRU was the real winner gaining 5.6% last month.

This fund provides targeted exposure to large- and mid-sized companies in Russia by tracking the FTSE Russia Capped Index, Holding 32 stocks in its basket, the fund is heavily weighted toward the top three firms that collectively make up for 49% share. From a sector look, energy takes the top spot at 51.3% while financials and materials round off the next two with double-digit exposure each. FLRU is often overlooked with AUM of just $12.5 million and average daily volume of 1,000 shares. It charges 19 bps in annual fees and has a Zacks ETF Rank #3 (Hold).

First Trust Brazil AlphaDEX Fund FBZ

Brazilian stocks logged in their first monthly gain in May since 2009 on easing political climate. Weakening growth in Latin America’s largest economy was offset by an improved political landscape, as domestic investors see better prospects for social security overhaul. As a result, FBZ gained 5.4% in a month (read: Leveraged ETF Roundup: Gold Miners Gain, Brazil Erodes).

The fund follows the NASDAQ AlphaDEX Brazil Index, an enhanced index, which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ Brazil Index. It holds 51 stocks in its basket with each accounting for no more than 5.5%. It has $134.9 million in AUM and trades in lower volume of about 131,000 shares per day on average. It charges 80 bps in annual fees and has a Zacks ETF Rank #3 with a High risk outlook.

iShares India 50 ETF INDY

The stock market in India has been rallying to new highs buoyed by prime minister Narendra Modi-led Bharatiya Janata Party’s (BJP) second-term victory in the general elections held last month and its market-friendly reforms. Additionally, rate cut hopes also contributed to the strength. Though all India ETFs are on a hot spree, INDY is up nearly 4% in a month (read: India ETFs to Soar of Modi’s Second Term, But How Long?).

This ETF provides exposure to the largest 52 Indian stocks by tracking the Nifty 50 Index. It has a moderate concentration on the top holdings with none of the securities holding more than 9.5% of the assets. With respect to sector holdings, financials takes the top spot at 39.7%, closely followed by information technology (13.7%), and energy (12.9%). The product manages assets worth $959.3 million and trades in good volume of nearly 210,000 million shares a day. It is a high cost choice in the space, charging 92 bps in annual fees.

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