The $147.2 million iShares MSCI New Zealand Capped ETF (NYSEArca: ENZL), the lone ETF tracking the small developed market, has seemingly defied logic this year.

Although the New Zealand dollar, colloquially known as the kiwi, has remained stubbornly strong to the point that some international bankers have overtly called it overvalued, the Reserve Bank of New Zealand has stubbornly refused to engage in Federal Reserve-esque easing or low interest-rate policies. That despite complaints from some of ENZL’s largest holdings about the strong kiwi. [New Zealand ETF’s Largest Holding Decries Strong Kiwi]

Year-to-date, ENZL is up 16.1%, easily trumping the 9.3% returned by the iShares MSCI Australia ETF (NYSEArca: EWA). Indeed, ENZL has been impressive among developed markets ETFs this year, but that run was almost derailed by the near loss of New Zealand’s lone AAA sovereign debt rating.

Moody’s Investors Service, the only of three major ratings agencies that rates New Zealand sovereign debt AAA, mulled stripping New Zealand of the highest possible credit rating, reports Matthew Brockett for Bloomberg.

A Moody’s staffer warned New Zealand’s widening current account deficit increases the country’s vulnerability to external shocks, Bloomberg report. ETFs tracking countries such as India and Indonesia have been punished this year due to those countries’ widening account deficits. [Timing not Right for Indonesia ETFs]

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