This has been a decently rewarding year for Wall Street despite the coronavirus attack but other corners of the globe haven’t returned in that a stellar fashion. The COVID-19 outbreak has weighed on foreign stocks more acutely and led them to lag the U.S. Index S&P 500 (up 12.9% YTD as of Dec 14, 2020).
Still, the announcement of success in Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) and AstraZeneca (NASDAQ:AZN) vaccines in the fourth quarter and year-long super easy money polices in various developed and emerging market economies pulled off many global stocks.
Investors should note that Asia ETF iShares Asia 50 ETF AIA was up 26.7%. iShares MSCI Emerging Markets ETF (NYSE:EEM) EEM added about 11.3%, First Trust Latin America AlphaDEX Fund FLN lost 17.5% and iShares China Large-Cap ETF FXI nudged up 4.1%.
Developed market ETF iShares MSCI EAFE ETF EFA has tacked on 3% gains. iShares MSCI Japan ETF EWJ has jumped 11.3%, Vanguard FTSE Europe ETF VGK is up 1.2% and iShares MSCI Eurozone ETF (EZU) has advanced about 4% this year.
What Led to the Somber Story for International Market?
The developed economies are slowing down this year due to coronavirus-led lockdowns and social distancing. For developed and emerging economies, the International Monetary Fund (IMF) estimates that national output will shrink by about 6% in 2020. However, China is expected to expand this year. For the developed economies, GDP is forecast to decline 4.7%. But for the emerging economies, excluding China, the loss in GDP will be a remarkable 8.1%.
Global Policy Easing: A Great Savior
To abate growth concerns, a great cycle of global easing was set in motion. The Federal Reserve has hinted to keep interest rates at rock bottom until at least the end of 2023. The European Central Bank has prolonged its pandemic emergency purchase program until March 2022while reinvesting its proceeds, i.e., continuing to cash injection, until at least the end of 2023. Many economies have been pursuing expansionary fiscal policies too.
A wave of cheap money inflows in international markets and low rates as well as vaccine hopes have finally resulted in foreign equity rally in the second half. Against this backdrop, below we highlight a few international ETFs that have topped not only the foreign markets but also the S&P 500.
Best-Performing International ETFs
Global-X China Consumer ETF CHIQ – Up 77.7%
The 69-stock fund measures the performance of large- and mid-capitalization segments of the MSCI China Index that are classified in the Consumer Discretionary Sector as per the Global Industry Classification System (GICS). The fund charges 65 bps in fees.
First Trust Intl Equity Opportunities ETF FPXI – Up 60.6%
The underlying IPOX International Index is a rules based market-cap weighted index that measures the performance of the 50 largest and typically most-liquid companies that are domiciled outside the U.S. within the IPOX Global Composite Index.The fund charges 70 bps in fees (read: 5 International Equity ETFs That Trumped S&P 500 in 1H of 2020).
China Technology Invesco ETF CQQQ – Up 49.66%
The fund is based on the FTSE China Incl A 25% Technology Capped Index. The fund will invest at least 80% of its total assets in securities that comprise the index as well as American depositary receipts and global depositary receipts based on the securities in the index.
Bluestar Israel Technology ETF ITEQ – Up 48.54%
The ETF targets innovative companies in the Israeli tech industry. The underlying BlueStar Israel Global Technology Index, the ???agship benchmark for Israeli technology stocks, includes Israeli companies listed on exchanges throughout the world.
Renaissance International IPO ETF IPOS – Up 41.58%
The Renaissance International IPO ETF is designed to provide investors with efficient exposure to a portfolio of non-U.S. newly public companies ahead of their inclusion in core equity portfolios. Sizable IPOs are added on a fast entry basis and the rest are added during scheduled quarterly reviews. Companies that have been public for two years are removed at the next quarterly review.
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iShares MSCI EAFE ETF (EFA): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports
iShares China LargeCap ETF (FXI): ETF Research Reports
Invesco China Technology ETF (CQQQ): ETF Research Reports
Global X MSCI China Consumer Discretionary ETF (CHIQ): ETF Research Reports
First Trust International Equity Opportunities ETF (FPXI): ETF Research Reports
Renaissance International IPO ETF (IPOS): ETF Research Reports
BlueStar Israel Technology ETF (ITEQ): ETF Research Reports
iShares Asia 50 ETF (AIA): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
First Trust Latin America AlphaDEX ETF (FLN): ETF Research Reports
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