3 ETF Groupings Significantly Outpace Comparable Benchmarks

Includes: AAXJ, SPY
by: Gary Gordon

The S&P 500 is down -3.5% since its early September highs. And many fear that a “fiscal cliff” stalemate will send stocks significantly lower in the weeks ahead.

However, there are a variety of ETF categories that have not only remained resilient in the wake of U.S. legislative uncertainty, but they’ve been exceptionally profitable. In fact, on Monday (12/10), prominent screening sites list roughly 60 individual ETFs hitting 52-week highs.

Here is a breakdown of several prominent categories:

1. Asia Pacific ETFs. I discussed the region’s revival in great detail at the start of Q4. In essence, the area is largely benefiting from a stabilizing Chinese economy and a commitment by the mainland’s leadership to provide stimulus when necessary. What’s more, Asia Pacific equities have been demonstrating remarkable relative strength, as evidenced by the iShares MSCI All-Asia excl Japan (NASDAQ:AAXJ):S&P 500 SPDR Trust (NYSEARCA:SPY) price ratio.

Below are eight Asia Pacific ETFs that reached new heights on Monday (12/10). Most of these vehicles are more than 10% above their 200-day simple moving averages, suggesting that they may be “technically overbought.” It follows that the best value in the grouping may also be the most diversified one… iShares MSCI All Asia excl Japan (AAXJ).

New 52-Week Highs For Popular Asia Pacific ETFs
3 Month % % Above 200-Day
EGShares China Infrastructure (NYSEARCA:CHXX) 31.8% 17.5%
Guggenheim China Real Estate (NYSEARCA:TAO) 20.8% 22.5%
iShares MSCI China (NYSEARCA:MCHI) 15.4% 10.0%
iShares MSCI New Zealand (NYSEARCA:ENZL) 11.0% 12.8%
iShares MSCI All Country Asia ex Japan (AAXJ) 9.4% 8.8%
iShares MSCI Thailand (NYSEARCA:THD) 8.2% 10.5%
iShares MSCI Australia (NYSEARCA:EWA) 7.3% 10.1%
SPDR S&P 500 (SPY) -0.7% 3.4%

2. Real Estate via REIT ETFs and Timber ETFs. Central bank policies worldwide have have sapped the life out of developed world government yields. At the same time, however, they have lowered mortgage rates, bolstered real estate demand and “reflated” market-based, income-producing securities.

One of the largest beneficiaries of the threefold trend is the global/international real estate investment trust. They offer dependable yields that are superior to treasuries. What’s more, when real estate enthusiasm is high, they tend to provide capital appreciation potential. Not surprisingly, global and international REIT ETFs that diversify across the biggest names in the REIT business have been providing a diversified approach to tremendous total return.

With a number of REIT ETFs appearing overvalued fundamentally, and others looking overbought technically, some investors have turned to lumber. In truth, if a global real estate recovery is genuine, and if emerging markets begin growing alongside that recovery, global timber ETFs will maintain their winning ways.

New 52-Week Highs For Popular Real Estate ETFs
3 Month % % Above 200-Day
iShares FTSE NAREIT Asia Index (NASDAQ:IFAS) 11.1% 15.2%
Guggenheim Global Timber (NYSEARCA:CUT) 10.0% 11.6%
Vanguard Global ex U.S. Real Estate (NASDAQ:VNQI) 9.6% 13.7%
iShares S&P Global Timber & Forestry (NASDAQ:WOOD) 9.3% 11.0%
iShares S&P World ex U.S. Real Estate (NYSEARCA:WPS) 8.5% 12.5%
WisdomTree International Real Estate (NYSEARCA:DRW) 8.3% 13.1%
SPDR DJ International Real Estate (NYSEARCA:RWX) 7.3% 11.9%
SPDR S&P 500 (SPY) -0.7% 3.4%

3. Emerging Market Debt ETFs. U.K. gilts, U.S. treasuries, JGBs and German “bunds” may still serve a panicky safe haven function. On the other hand, investors are increasingly seeking more bang from their income investing possibilities.

Enter emerging market income assets. Sovereign country debt or corporate bonds? Local currency or dollar hedged? Right this moment, those questions don’t seem to matter. If the ETF represents a higher comparable yield than a developed world alternative, it is “in demand.”

New 52-Week Highs For Emerging Market Debt ETFs
3 Month % Annual Yield
PowerShares China Yuan Dim Sum Bond (NYSEARCA:DSUM) 4.1% 3.2%
PowerShares Emerging Market Sovereign (NYSEARCA:PCY) 4.0% 4.7%
WisdomTree Emerging Mkt Local Debt (NYSEARCA:ELD) 3.5% 3.2%
SPDR Barclays EM Local Bond (NYSEARCA:EBND) 3.2% 2.0%
Market Vectors EM High Yield Bond (NYSEARCA:HYEM) 3.2% 7.2%
WisdomTree Asia Local Debt (NYSEARCA:ALD) 3.0% 1.0%
iShares Core Total US Bond (NYSEARCA:AGG) 0.6% 2.4%

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.