Global equity markets haven’t been a good place for your money in 2011. After a decent start to the year that pushed many global exchange-traded funds to their year-to-date highs by April and May, the bottom began to fall out. The drop in global ETFs from their 2011 peaks has been particularly pernicious in many emerging markets, including the so-called BRIC nations of Brazil, Russia, India and China. Even a strong European economy like Germany saw its market sink in what has been a precarious year for global investors.
The good news here is that the fall from grace in many of these once-stellar markets could be red meat for hungry bottom fishers looking to ride the next rebound. Here are five battered global ETFs for those looking to play a bounce.
iShares MSCI Germany
The decline of stocks that trade on the German market is perhaps the biggest confirmation of just how tough things have been for Europe. The iShares MSCI Germany Index (AMEX:EWG) is the fund that best reflects the trading action in Germany, and so far in 2011, that fund is down 17.3%. The measure of the German market, which includes such global stalwarts as Siemens AG, BASF, Bayer and Daimler AG, dropped an astounding 23.3% during the past three months, but the latest action in the shares suggests a rebound in the works. During the past month, EWG shares are up 4.3%. Once a concrete agreement is reached to clean up Greece’s fiscal mess and prevent any nasty spillover that could soil the European financial system, look for EWG and other European markets to rebound.
iShares FTSE China 25 Index
There are few sectors that have gone from boom to bust with as high a profile as China. The darling of the markets a few years ago, China stocks have become toxic in 2011. The iShares FTSE China 25 Index (AMEX:FXI), a measure of the biggest stocks traded on the Shanghai Exchange, is down 25.3% so far this year, and that’s despite China remaining one of the strongest economies in the world. Recent economic data show that China’s economy grew at the rate of 9.1% in the third quarter. That’s about five times faster than here in the U.S. Yet despite the rapid growth, the fact that China’s economy has contracted in recent quarters has some betting on the demise of Chinese stocks. Given China’s economic might, any rebound in the global economy could trigger a big surge in Chinese stocks, and that means buying this battered ETF now could prove to be a very wise decision.
PowerShares India
India is another economy that continues to grow at a hefty clip, but whose equity markets have suffered this year along with the general distaste for emerging markets. The World Bank projects India’s economic growth to slow to about 7% to 8% this year as well as 2012, but that’s still robust expansion when compared to the U.S. Yes, India’s economy is struggling with high inflation, high interest rates and some difficult social and structural problems. However, the country has a huge population of educated workers, and a big manufacturing base. The PowerShares India Portfolio (AMEX:PIN) represents some of the strongest Indian companies trading today. This ETF has taken a 26.6% hit year to date; however, since the beginning of October, the shares have rebounded more than 5%. That means now could be a great time to jump on the Indian rebound caravan.
iShares MSCI Brazil
Another of the BRIC nations that has been beaten up in 2011 is Brazil. The country is rich in natural resources, and many of the stocks in the iShares MSCI Brazil (AMEX:EWZ) represent the biggest natural resources firms in the world. Metals and mining giant Vale S.A. (NYSE:VALE) and oil behemoth Petrobas Brazil are two of the largest holdings in EWZ. The recent decline in precious metals, oil and other commodities has weighed heavily on these companies, and that has taken its toll on EWZ. The fund is down 28.1% this year, but since the October rally began, EWZ is up nearly 13%. That’s the kind of quick rebound possible in a fund with commodity exposure via some of the biggest natural resources firms around, and it’s this kind of potential upside that bottom fishers are hoping to catch.
iShares MSCI BRIC Index Fund
If you want to ride a global BRIC rebound higher, then why not choose the ETF that has all four BRIC countries represented? The iShares MSCI BRIC Index Fund (AMEX:BKF) also has had a rough go of things in 2011, falling 27.2% year to date. However, if the global economy starts to regain its health in 2012, a BRIC fund could play an important role in building up a profitable portfolio. So far in October, BKF has surged more than 11%, proving there’s still plenty of sturdy mortar in these BRICs.
As of this writing, Jim Woods did not own a position in any of the aforementioned stocks.
