The New Zealand dollar has gained 6.6% against its U.S. counterpart since early February. In theory, kiwi strength should be hampering New Zealand equities.

In reality, the opposite is true as the iShares MSCI New Zealand Capped ETF (NYSEArca: ENZL) is up almost 17.5% this year. On Friday, ENZL, the lone New Zealand ETF, is higher by almost 1% on volume that has already eclipsed the daily average. Earlier Friday, ENZL hit another intraday all-time high, extending its gains since the start of March to nearly 9%. [Big Things From Small ETFs]

That easily trumps the 5.8% gained by the iShares MSCI Australia ETF (NYSEArca: EWA) over the same period. In mid-April, Morningstar called New Zealand equities fairly valued, placing a hold recommendation on 60% of the country’s stocks while voicing concern about the utilities sector, 10.2% of ENZL’s weight.

Morningstar also said New Zealand’s telecom sector, 12.5% of ENZL’s weight, is fairly valued, but since April 15, ENZL has climbed 3.3%, indicating the ETF has reaped the rewards of a sector mix that features an obvious value tilt. Industrials, telecom and utilities combine for over 38% of ENZL’s weight. [Value ETFs Race to New Highs]

New Zealand is not perfect. The export-dependent country is grappling with the effects of the strong kiwi and there is evidence to suggest a housing bubble could be forming there. New Zealand’s rate of consumer is among the highest in the developed world.

In an effort to stem the real estate bubble, in March, the Reserve Bank of New Zealand became the first developed market central bank to raise interest rates. RBNZ hiked its official cash rate to 2.75% from 2.50% and further rate hikes are expected. [Rate Hike Lifts New Zealand ETF]

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