Apologies for following up good news with glum tidings, but some single-country exchange traded funds have really struggled this year.
As we noted on Thursday, for most of the world’s major equity bourses, 2013 has been a good year. There have also been plenty of forgettable performances in international markets, which have translated to some forgettable ETF returns. [10 Best Single-Country ETFs]
Some notes about the following list. First, data applicable to the local benchmarks is in local currency terms and comes by way of Bespoke Investment Group. The data were posted on Nov. 12. Second, there will be discrepancies between local market and ETF returns because the following ETFs are not benchmarked to the primary indices in the countries the ETFs track.
As was the case with the top-10 list, some markets will be excluded from this list because there is no applicable ETF. Jamaica and Ukraine are two examples.
Note the distinct Latin America flavor with our 10 worst list, which starts with the worst going on to the “best”…
iShares MSCI All Peru Capped ETF (NYSEArca: EPU)
Local Market YTD: -23%
ETF YTD: -27.2%
Comment: A succinct explanation for EPU’s 2013 woes does the trick. Look at a list of the world’s largest gold and silver producers. Then look at performance charts for the major gold and silver ETFs. One plus one equals Peru’s status as a major producer of those metals has plagued EPU. [How Metals Prices Move the Peru ETF]
iShares MSCI Brazil Capped ETF (NYSEArca: EWZ)
Local Market YTD: -15%
ETF YTD: -12.6%
Comment: Faltering commodities demand, stagflation fears and a government that is seen as inept at dealing with those problems and hostile to Western investment have doomed EWZ and rival Brazil ETFs this year. To boot, there are lingering doubts about Brazil’s readiness for the 2014 World Cup, one of the world’s largest sporting events. [World Cup Hasn’t Boosted Brazil ETFs]
iShares MSCI Chile Capped ETF (NYSEArca: ECH)
Local Market YTD: -11.8%
ETF YTD: -22.3%
Comment: ECH has exaggerated the performance of Chile stocks in the home market due in part to the perception of ECH as a commodities play. Arguably, that should not be the case because materials is merely the fifth-largest sector weight in ECH at 10.1% or not even half the weight allocated to utilities. The rub: Chile is the world’s largest copper producer.
Global X FTSE Colombia 20 ETF (NYSEArca: GXG)
Local Market YTD: -9.79%
ETF YTD: -13.2%
Comment: GXG is in the midst of a three-day winning and that sounds nice until remembering the ETF closed loser for 12 straight days before Nov. 13. Colombia is a major copper and silver producer and that explains some of GXG’s problems this year. [Colombia ETF Crumbles]
iShares MSCI Mexico Capped ETF (NYSEArca: EWW)
Local Market YTD: -9.31%
ETF YTD: -7.5%
Comment: When considering that an improving U.S. economy and equity market have previously been positive catalysts for Mexican equities, EWW is an epic disappointment this year. On the other hand, it has been less bad than some of its LatAm ETF counterparts.
iShares MSCI Turkey ETF (NYSEArca: TUR)
Local Market YTD: -8.1%
ETF YTD: -15.9%
Comment: TUR is something of a “paradise lost” ETF. It was one of 2012’s best emerging markets ETFs as Turkey gained favor among global investors as a beacon of economic growth and stability in a volatile part of the world. That positive sentiment was undone at the hands of violent anti-government protests earlier this year. The Turkish lira ranks among the worst-performing developing world currencies this year, exacerbating TUR’s problems.
iShares China Large-Cap ETF (NYSEArca: FXI)
Local Market YTD: -6.27%
ETF YTD: -7.6%
Comment: With Friday’s 4.4% gain, FXI was able to cut its year-to-date loss by a third. To be fair to China ETFs, several have outperformed FXI this year and several have generated excellent returns. In the case of FXI, it is not bereft of catalysts with which to rally into year-end. For example, Chinese stocks remain inexpensive relative to the broader emerging markets pack. [Reforms Boost China ETFs]
Market Vectors Russia ETF (NYSEArca: RSX)
Local Market YTD:-5.88%
ETF YTD: -6.6%
Comment: Compared to the other major BRIC ETFs, RSX has been less bad this year. Aside from the ever-present possibility of higher oil prices providing a boost to RSX and rival Russia ETFs, catalysts include historically low valuations and Russia’s ongoing efforts to increase its allure as an emerging markets dividend destination.
iShares MSCI Poland Capped Investable Market Index Fund (NYSEArca: EPOL)
Local Market YTD: -3%
ETF YTD: EPOL is up 4.5% year-to-date while the rival Market Vectors Poland ETF (NYSEArca: PLND) is higher by 7%.
Comment: Economic growth is slowing Poland, but EPOL and PLND offer advantages that more prominent emerging markets ETFs lack. For example, Poland is home to shrinking deficits and the zloty has been one of the developing world’s best currencies this year.
iShares MSCI South Korea Capped ETF (NYSEArca: EWY)
Local Marktet YTD: Flat
ETF YTD: -1.7%
Comment: Earlier this year, EWY was hamstrung by concerns the weak yen and Federal Reserve tapering would hinder Asia’s fourth-largest economy. South Korean stocks have dealt with those fears with aplomb as EWY is up more than 13% in the past 90 days. Cheap valuations plus a strong currency plus a reputation as one of the least volatile emerging markets has equaled success for