With the first quarter almost in the books, the S&P 500 will head into Monday with a gain of barely more than 1%. Given the start to the year for U.S. stocks, that performance could have been worse. Then again, after last year’s 32.3% gain for the benchmark U.S. index, investors were likely expecting a better start to 2014.
As is the case in every quarter, some ETFs have impressed and some have not. Here, we’ll take a look at some of the first quarter’s worst laggards, only of the non-leveraged variety.
A couple of notes about this list. First, investors will likely notice a distinctly international tilt in the following group. Second, volatility products, two of which rank among the quarter’s 10 worst exchange traded products, were excluded from this list.
Finally, in the case of single-country ETFs tracking the same nations, we condensed some of these funds into one spot on the list where all of the relevant funds will be highlighted. And that is a good segue to starting with the…
Market Vectors Russia ETF (NYSEArca: RSX)
Year-to-date loss: 18.4%
Comment: A couple of caveats here. First, RSX gets this spot because it is the largest Russia ETF by assets, but to be fair, the iShares MSCI Russia Capped ETF (NYSEArca: ERUS) and the SPDR S&P Russia ETF (NYSEArca: RBL) have not been angels, either. Second, Russia ETFs picked up the pace a bit over the last two weeks, perhaps getting a lift from some of the lowest valuations in the developing world. [The White House is no Place for ETF Advice]
iPath Dow Jones-UBS Copper Total Return Sub-Index ETN (NYSEArca: JJC)
YTD: -11%
Comment: Bad news: Copper, once considered a useful indicator of global economic growth because of its widespread industrial application, has been declining while the world economy is expected to expand the most in three years.
Good news: JJC looks to be finishing the quarter on a strong note as emerging markets equities and ETFs, including some tracking China, have rallied. That is not a promise of a sustainable rally, but rather a reminder of how important China is to the copper market. [Doctor Copper Seeing Just One Patient: China]
Global X China Financials ETF (NYSEArca: CHIX)
YTD: -6%
Comment: Prior to Friday’s 3% gain on above average volume, CHIX was saddled with a much steeper year-to-date loss, one caused primarily by escalating fears regarding China’s shadow banking and an increasing number of headlines pertaining to corporate defaults in the world’s second-largest economy. No one can guarantee those concerns have been shelved for any lengthy amount of time, but CHIX did gain 6.1% last week.
Japan ETFs
Comment: Last year’s heroes have turned into goats in 2014 as risk-off sentiment has chased global investors into the safe-haven yen. Although the yen has risen this year, the declines among Japan ETFs are not limited to currency hedged fair such as the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) and the db X-trackers MSCI Japan Hedged Equity Fund (NYSArca: DBJP). The iShares MSCI Japan ETF (NYSEArca: EWJ) and the Maxis Nikkei 225 Index Fund (NYSEArca: NKY), neither of which are hedged yen plays, have traded lower as well.
China ETFs
Comment: Another group that is packed with so many constituents that in the essence of fairness, one should not be isolated over another. If not for the aforementioned Russia ETFs, some of the most popular China ETFs would be among this year’s worst performing single-country BRIC ETFs. To that end, large-cap China ETFs have bled cash as investors have sought out other global opportunities. [China ETFs Continue Bleeding Cash]
The last of the China ETF offenders includes the iShares China Large-Cap ETF (NYSEArca: FXI), iShares MSCI China ETF (NYSEArca: MCHI), SPDR S&P China ETF (NYSEArca: GXC) and funds with exposure to Chinese A-shares. It is just one week, but those looking for opportunity with China ETFs will like to know that FXI, GXC and MCHI each closed higher last week.
Market Vectors Steel ETF (NYSEArca: SLX)
YTD: -6%
Comment: The bulk of SLX’s problems this year can be tied to tepid demand in developing markets, which makes an ETF with a 21% weight to Brazil and an almost 14% to iron ore giant Vale (NYSE: VALE) vulnerable to those demand dynamics.
There is some good news pertaining to SLX. Brazilian stocks, helped by Vale, are on the move higher, plus, Morningstar data note SLX is the least expensive ETF on valuation.
iShares MSCI Mexico Capped ETF (NYSEArca: EWW)
YTD: -4.6%
Comment: Only the iShares MSCI All Peru Capped ETF (NYSEArca: EPU) is preventing EWW from the dubious honor of being the worst Latin America single-country ETF to this point in 2014. While there are reasons to like Latin America’s second-largest economy, such as political and energy sector reforms, there are cautionary tales with EWW.
There is the ETF’s alarming lengthy under-performance of the S&P 500. Then there is the fund’s recent and equally as notably lagging of the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ). While Mexico is not short of fans in the global investment community, EWZ appears to be the better near-term better rotation play. [The Temptation of Brazil ETFs]