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International ETFs Suffer as US Stocks Plunge

Posted by Sun on June 18, 2008
Post viewed 726 times, 4 so far today
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International ETFs, especially emerging market ETFs, have been generous to investors in the past couple of years (remember the good “old” days of high-flying Chinese stocks?). However, things turned a little bit sour since the financial crisis triggered by subprime mortgage in the summer of 2007. On surface, the trouble here in this country seems affecting developed countries, such as U.K. and Switzerland, whose banks were exposed in this mess. But the suffer is not just limited in the developed world. Developing markets also took a hit as the slowed U.S economy tempered the demands from these countries.

In a little over a month, this crisis will be one year old. In the past year, the Dow lost 10.8%, the S&P dropped 11.9%, and the NASDAQ did a little better, downing 6.4%. Looking around the world, where’s the place for U.S. investors to put their money? The following table has performances of iShares MSCI individual country ETFs of the past 1 year, 3 years, and so-far this year.

Fund Name YTD return(%) 1-yr return(%) 3-yr return(%)
FTSE/Xinhua China 25 Index (FXI) -18.84 19.92 37.69
Australia Index (EWA) -6.00 0.97 20.59
Austria Index (EWO) -1.08 -7.02 18.13
Belgium Index (EWK) -8.03 -15.56 11.33
Brazil Index (EWZ) 12.54 55.23 59.85
Canada Index (EWC) 5.76 15.39 25.67
Chile Index (ECH) 1.28 N/A N/A
France Index (EWQ) -8.75 -7.21 14.47
Germany Index (EWG) -10.81 0.67 22.58
Hong Kong Index (EWH) -17.05 10.52 17.03
Israel Cap Invest Mkt Index (EIS) N/A N/A N/A
Italy Index (EWI) -12.08 -12.39 8.53
Japan Index (EWJ) -2.33 -9.46 9.52
Kokusai Index (TOK) -7.53 N/A N/A
Malaysia Index (EWM) -14.22 -4.78 19.81
Mexico Index (EWW) 6.66 -2.49 33.13
Netherlands Index (EWN) -7.08 -3.28 18.09
Singapore Index (EWS) -7.61 -3.36 23.17
South Africa Index (EZA) -9.32 -2.81 21.36
South Korea Index (EWY) -14.79 -7.42 19.67
Spain Index (EWP) -7.89 3.41 22.29
Sweden Index (EWD) -3.94 -12.58 16.52
Switzerland Index (EWL) -4.31 -3.11 15.02
Taiwan Index (EWT) 1.73 4.49 9.99
Thailand Invest Mkt Index (THD) N/A N/A N/A
Turkey Invest Mkt Index (TUR) N/A N/A N/A
United Kingdom Index (EWU) -9.80 -10.92 10.34

Brazil, whose economy is boosted by the booming commodity markets, is the clear winner here in all three periods. Biggest lowers are China and Hong Kong.

Are you investing in any individual country? I have PowerShares Gloden Dragon Halter USX China (PGJ) and for once, it was a great ETF to own, riding high with Chinese stocks. While investing in single county (the right country of course) can have tremendous result, it can also be very volatile. A better choice could be investing in a block of countries such as BRIC instead.

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9 Comments
June 18, 2008

Any opinion on what will happen to China ETFs once the Olympics start?

Posted by Jonathan
June 20, 2008

Jonathan: I don’t think China ETFs have anything to do with the Olympics. There were predictions before that China’s economy will collapse after the game. I think Someone will be fool to believe such predictions.

If you look at what happened to the Chinese stock market since last summer, you can see that the huge drop in the Shanghai stock index has a lot to do with investor sentiment and policies, rather than the fundamentals of the economy. When you have even a small portion of 1.3 billion people buy stocks, it’s enough to push the stock market up like crazy.

China’s economy is still growing at 10+% annual rate, but small investors no longer see the stock market as the guaranteed way to get rich quickly after the government started to curb the crazy stock market last fall. Chinese stocks, as well as stocks traded in Hong Kong, peaked in last October because the government hinted in the summer that it will allow mainland investors to buy directly stocks listed in Hong Kong to diverse the money, but later changed its mind to postpone such plan indefinitely. I guess the government realized at that time that this won’t be a good idea because it can only artificially inflate the Hong Kong market. Both markets started fall and continued to fall after the government started to require banks to increase their reserves to battle inflation.

Most small investors in China don’t see the stock market as the place to build wealth slowly. Rather they see it as a way to make quick money. They can enter the stock market all together, and they can also leave it all together. Right now, nobody wants to buy stocks any more. But then the stock market is functioning more normally.

I don’t think the Olympics will change anything in terms of performances of stocks. If there’s any connection, then the market should go up now instead of losing some 60% in a little over half a year. If China’s economy can keep going at 10%, then we should still buy Chinese stocks and ETFs :)

Posted by Sun
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