The United States represents about half of the world market capitalization – the value of shares of all companies worldwide. While that may seem like a giant piece of the pie, international markets, which make up the other half, offer a plethora of investment opportunities. Combining international investments with US investments, especially in a long-term portfolio, can result in better diversification, as holdings don't always move in lockstep.
We've already talked about region and country-specific exchange-traded funds (ETFs) that provide exposure to ,. ETFs operating in the US can provide investors with access to stocks traded on foreign indices.
Below we will look at two additional ETFs designed to track the indices of Australia and Mexico, two of the 20 largest economies by gross domestic product (GDP):
1. iShares MSCI Australia ETF
Current Level: $ 20.57
52 Week Range: $ 12.73 – $ 23.54
Dividend yield (12 months trailing): 3.7%
Expense Ratio: 0.50% per year, or $ 50 with an investment of $ 10,000
The iShares MSCI Australia ETF (NYSE 🙂 provides exposure to large and medium-sized companies in Australia. EWA, which currently has 65 companies, tracks the index .
The top three companies are Commonwealth Bank Of Australia (ASX 🙂 CSL (ASX 🙂 and BHP Group (ASX 🙂 . They comprise about 28% of net assets, which exceed $ 1.2 billion.
The P / E and P / B ratios of EWA are 16.42 and 1.96, respectively. Year-to-date, the fund is down 9.14%. However, since it hit a 52-week low in late March, EWA is up more than 60%, so $ 1,000 invested in EWA in late spring wouldn't be worth about $ 1,600.
As the 14th economy in the world, Australia is considered stable and low risk, making the iShares ETF and other Australian ETFs attractive to those looking to boost long-term portfolios with diversification of international markets.
In addition to the strong case for Australia, the country is ranked AAA by global agencies such as Standard & Poor & # 39; s, owned by S&P Global Fitch and . Moody & # 39; s. This strong credit rating helps investors estimate Australia's creditworthiness and has a significant impact on the country's financing costs.
Investors may want to monitor five major industries for the nation, including energy and resources, financial services, education, tourism and agriculture. Australia, for example, is one of the top producers of and agricultural products.
For those considering EWA, taking short-term profit could potentially lower EWA in the coming weeks, creating a better entry point.
2. iShares MSCI Mexico ETF
Current Level: $ 34.68
52 Week Range: $ 25.03 – $ 48.19
Dividend yield (12 months trailing): 1.71%
Expense Ratio: 0.49% per year, or $ 49 with an investment of $ 10,000
The iShares MSCI Mexico Capped ETF (NYSE 🙂 provides exposure to a wide variety of companies in Mexico. EWW, which currently has 46 companies, tracks the index .
The top three companies are America Movil (MX 🙂 Walmart De Mexico (MX 🙂 and Fomento Economico Mexicano (MX 🙂 . They comprise approximately 38% of the net assets, which exceed $ 800 million.
The P / E and P / B ratios of EWW are currently 14.05 and 1.76 respectively. Year-to-date, the fund is down 22.98%. However, since hitting its 52-week low in late March, EWA is up more than 38%.
According to foreign trade statistics released by the US Census Bureau, Mexico is the US's second largest trading partner, after Canada, in terms of exchanged goods. Therefore, as the fifteenth largest economy in the world, Mexico occupies an important place for the US economy.
In 2018 and 2019, both Mexican stocks and stocks were volatile, in part due to the rhetoric about tariff wars. While investors were optimistic about a healthy 2020, the pandemic changed sentiment significantly. The plunge at the beginning of the year didn't help Mexico's natural resources industry either.
Mexico is likely to receive more attention in the coming weeks in the run-up to November's US presidential election. Mexican stocks may become volatile again, but we think long-term investors can find value in EWW if the price falls to $ 30 or below.
The Bottom Line
] Country-specific ETFs offer diversification and index tracking benefits at a relatively low cost. They can potentially be used by a wide variety of retail and institutional investors for long-term passive investing, short-term speculative trading, tactical asset allocation, hedging and arbitrage. In the coming weeks, we plan to fund other funds that specialize in specific countries.
