So far in 2013, it has been a tale of U.S. and Japan dominating the global equities scene — and the best ETFs, unsurprisingly, are in these regions.
Thanks to easy central bank policies in both nations — specifically quantitative easing at home and “Abenomics” policies in Japan that have weakened the yen and kept rates low — these countries have been runaway winners. The S&P 500 is up about 18% as of this writing, while the Nikkei is up about 21% since Jan. 1.
So it’s no surprise that country-based funds focused on these nations have been among the best ETFs to buy in 2013. But what other nations should you be watching … and forget about just the best ETFs — which funds should you avoid like the plague?
Well, ETFs dealing in emerging markets, mainly. The slowdown in China has gutted related commodity providers in the Pacific that had fueled Asian manufacturing.
The accompanying table shows the 28 main country-specific funds out there and how they’ve done year-to-date in 2013, and here’s a quick look at the five best ETFs and the 5 worst:
5 Best ETFs to Buy
Click to Enlarge iShares MSCI Japan ETF (EWJ), up 21% year-to-date. Top holdings include Toyota (TM) and Mitsubishi UFJ Financial Group (MTU). Toyota has snapped back from the tsunami lows, and Mitsubishi Financial is among a number of Japanese banks that have benefited from central bank policies.
- SPDR S&P 500 ETF (SPY), up 18% year-to-date. Top holdings include Exxon Mobil (XOM) and Apple (AAPL) — but considering both are down since January, that makes the gains all the more impressive for the broader index.
- iShares MSCI Netherlands ETF (EWN), up 17% year-to-date. Top holdings include consumer products giant Unilever (UL), which has been sleepy, and financial stock ING Groep (ING) that has jumped 26% on better a lending environment in Europe.
- iShares MSCI Spain ETF (EWP), up 17% year-to-date. Top holdings include troubled Spanish bank Banco Santander (SAN), which is up slightly in 2013 but turning around, and telecom giant Telefonica (TEF), which is up 18% YTD.
- iShares MSCI Switzerland ETF (EWN), up 17% year-to-date. Top holdings include packaged foods giant Nestle (NSRGY), which is up only slightly in 2013, and pharmaceutical giant Roche (RHHBY), which has tacked on about 35% YTD.
5 Worst ETFs to Buy
- iShares MSCI Chile Capped ETF (ECH), down 19%. Top holdings include regional utility stocks, including Enersis (ENI), which is down 10% YTD.
- iShares MSCI Turkey ETF (TUR), down 15%. Top holdings are mainly Turkish banks, which have taken a beating amid geopolitical unrest in Turkey and its neighbors.
- Powershares India Portfolio (PIN), down 12%. PIN top holding Infosys (INFY), a tech company with Western ties, has actually posted a nice 15% gain despite soft growth in India … but more locally focused components like HDFC Bank (HDB), which is down more than 20%, haven’t fared well at all.
- iShares MSCI Brazil Capped ETF (EWZ), down 12%. Brazil’s economy has cooled big-time thanks to the dual pressures of inflation and lower commodity demand out of China. Top holdings Petrobras (PBR) and financial stock Itau Unibanco (ITUB) are both in the red in 2013.
- iShares MSCI South Africa ETF (EZA), down 11%. Another example of a resource-rich country that hasn’t been able to hang without big exports to China is South Africa. Top holding Sasol (SSL), an energy company, has managed to post a double-digit gain, but miners and financial stocks like FirstRand (FANDY) have had a much worse go of things.
Related Reading on the Best ETFs
- More on the iShares MSCI Japan ETF (iShares)
- Abenomics still makes Japan attractive. (CNBC)
- More on the SPY fund. (SPDRs)
- Of course, Henry Blodget says stocks will crash soon and the U.S. market will go nowhere … (The Slant)
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.