On going state interference is bad news for EWZ because the ETF’s two largest holdings are Petrobras (NYSE: PBR) and Vale (NYSE: VALE) securities and it has been the struggles of those state-run firms that have, in part, contributed to a dismal 2013 for EWZ. [Brazil ETFs on the Brink]
BlackRock is also underweight on Mexico and Brazil. In what has been a banner year for U.S. equities, the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) has not received a proximity benefit and is off 2%. That is a severe disappointment given the tendency of Mexican stocks to rise in unison with their U.S. counterparts.
“Meanwhile, we remain cautious on South Africa due to extended valuations, large external imbalances and under-pressure profit margins,” writes Koesterich.
The iShares MSCI South Africa ETF (NYSEArca: EZA) is down 11% this year and has been hampered by South Africa’s status as a major producer of precious metals. Mexico and South Africa were among the most expensive global markets at the end of last year, which proved to be a sign of this year’s glum performances. [Pricey Markets Lagged in 2013]
iShares MSCI South Africa ETF
