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International Markets Beat US in 2017: 3 Best Country ETFs

Sweta Killa
MGIC (MTG) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

This has been a banner year for stocks across the globe. This is especially true, as the global stock market has climbed every single month in 2017, for the first time in the 30-year history of the MSCI AC World Index, according to Charles Schwab. According to the Organization for Economic Cooperation and Development, all 45 countries are on track to grow this year and are expected to continue the momentum in 2018.

The rally was mainly driven by strengthening economic fundamentals, booming trade, strong corporate earnings and a rise in commodity prices. In particular, Trump’s tax overhaul and a spending spree is boosting investors’ confidence in the world’s largest economy while China, the world’s second largest economy, is holding up well. Meanwhile, Eurozone has been growing at the fastest pace in a decade. Further, investors' unstoppable enthusiasm for technology stocks has added to the global strength (read: Bet on Trump Trade & Republicans with These New ETFs).

While the U.S. stock market is in the midst of its second-longest bull run in history, the real encouragement came from the international stock market. This is especially true as Vanguard FTSE All-World ex-US ETF VEU targeting the international equity market has gained about 26.6% this year compared with growth of 24.2% for iShares MSCI ACWI ETF ACWI, which targets the global stock market, including the United States, and 22% for the SPDR S&P 500 ETF Trust SPY.

Political instability in the United States, fear of lofty valuation as well as the prospects to end the cheap monetary policy era, especially in Europe, makes international investing more tempting. The European Central Bank (ECB) will start scaling back its massive €60 billion per month asset buying program to halve from January 2018 until at least September 2018. The tightening of policy will be in sync with the Fed and push the U.S. dollar lower and other currencies higher, indicating continued outperformance for the international bourses.

Given this, we have highlighted the top performing country in ETFs of this year. Any of these could be excellent plays for investors seeking to ride out the bullish trend to start the New Year given that these have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).

WisdomTree China ex-State-Owned Enterprises Fund CXSE

Chinese stocks are surging amid prevailing 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 81.1% this year. This is because the fund offers exposure to targeted Chinese stocks that are not state-owned enterprises (read: Putting Up the Tree with Top ETFs of 2017).

It tracks the WisdomTree China ex-State-Owned Enterprises Index, charging 32 bps in annual fees. Holding 136 securities in its basket, the fund is concentrated on the top two firms with a combined 18.5% exposure while others make up for no more than 6.51% share. Information technology is the top sector accounting for 34% share followed by consumer discretionary (22.5%) and financials (16.9%). The product has accumulated $154.6 million in its asset base while trades in a small average volume of 26,000 shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Columbia India Small Cap ETF SCIN

Stocks from India were on a tear buoyed by the landslide victory of prime minister Narendra Modi in a key state election, upbeat GDP data, a slew of economic reforms, and improving current account deficit. While all India ETFs enjoyed smooth trading, SCIN targeting the small cap segment stole the show with 64.6% gains. It tracks the Indxx India Small Cap Index and holds 71 securities in its basket with none making up for more than 4.84% of assets.

From a sector look, industrials dominates the fund’s returns at 27.2%, closely followed by consumer discretionary (20.1%) and financials (18%). The fund has so far amassed $34.2 million in its asset base while charging 86 bps in annual fees. Volume is light, exchanging around 10,000 shares in hand a day. SCIN has a Zacks ETF Rank #2 with a High risk outlook (read: Here's Why India ETFs Are Still Worth Buying).

iShares MSCI Germany Small-Cap ETF EWGS

Being the powerhouse of the European economy and the driver of the Euro zone at large, Germany is benefiting from booming demand from emerging markets amid political uncertainty. EWGS offers targeted exposure to small-cap German stocks by tracking the MSCI Germany Small Cap Index. It is a home to 118 stocks with each holding less than 4.6% of assets. From a sector look, industrials takes the largest share at 26.5% while information technology, real estate and healthcare round off the next three spots with double-digit exposure each.

The ETF has managed assets worth $60.1 million and trades in average daily volume of 11,000 shares. It charges 59 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Germany Investing: What ETF Investors Need to Know).

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SPDR-SP 500 TR (SPY): ETF Research Reports
ISHRS-MSCI ACWI (ACWI): ETF Research Reports
WISDMTR-TR WTCH (CXSE): ETF Research Reports
ISHARS-MS GRMSC (EWGS): ETF Research Reports
VANGD-FTSE AWLD (VEU): ETF Research Reports
COL-INDIA SC (SCIN): ETF Research Reports
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