When looking for overseas exposure, investors may want to target Europe and region-specific exchange traded funds.
Portfolio Strategist Andrew Burkly, along with Sam Burns and Scott Davies at Oppenheimer & Co., argue that European markets are among the highest ranked, whereas emerging markets and Asian economies look weaker, reports Dimitra DeFotis for Barron’s.
“Overall, we continue to think Europe is relatively attractive, as the European Central Bank’s ongoing quantitative easing program, the corresponding weaker euro, and positive relative earnings revisions all should support relative stock price performance over the next several months,” according to the Oppenheimer strategists.
Moreover, the firm argues that the Greece troubles have had little impact on the overall picture. Relative revisions have also come off their recent peak but remain well above average, while relative valuations have declined.
For instance, the iShares MSCI EMU ETF (NYSEArca: EZU) and the SPDR EURO STOXX 50 (NYSEArca: FEZ), which both focus on Eurozone countries, show a price-to-earnings ratio of 15.9 and 15.2, respectively, whereas the S&P 500 index has a 18.4 P/E. [Europe Stocks, ETFs Look Cheap]
The euro-currency hedged Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) has a 16.7 P/E, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) has 15.9 P/E and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) has a 16.9 P/E.
On the other hand, the Oppenheimer warned investors of the deteriorating outlook in the emerging markets.
“Emerging markets in general are quite weak, with six of the bottom eight ranks held by emerging market countries,” the strategists added. “India fell into the bottom quintile this month, edging out Russia, while Mexico, Brazil, and Malaysia remain there. Notable decliners in rank include Thailand, Turkey and Singapore.”
The emerging markets have been underperforming this year, with the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which tracks the MSCI Emerging Markets Index, down 1.7% year-to-date.
India markets has been falling off over the past few months. The WisdomTree India Earnings Fund (NYSEArca: EPI) has dipped 6.5% over the last three months.
The Market Vectors Russia ETF (NYSEArca: RSX) has plunged 13.3% over the last three months, but it is still up 21.7% so far this year.
Many other markets have been lagging behind this year as well. For instance, year-to-date, the iShares MSCI Turkey ETF (NYSEArca: TUR) fell 13.3%, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) declined 9.6%, iShares MSCI Mexico Capped ETF (NYSEArca: EWW) dipped 2.4% and iShares MSCI Malaysia ETF (NYSEArca: EWM) dropped 9.4%.
For more information on international markets, visit our global ETFs category.
Max Chen contributed to this article.