International ETF Update: Israel, Japan, Portugal

As Israel Grows, So Do ETF Options

Israel's economy is surpassing expectations, and if it continues this way, it could deliver solid performance to its ETFs.

The country saw growth in the first quarter, even though it was a slightly slower rate than in the previous two. GDP expanded at a rate of 5.4%, while it grew 5.3% in 2007 - faster than the United States, Europe and Japan, reports Trang Ho for Investor's Business Daily.

It's projected to grow 3% this year, owing much to expectations that a slowing U.S. economy will affect Israel. We are the country's heaviest trading partner, and exports make up one-third of the country's GDP. The United States accounts for 37% of trade, and Europe for 20%.

Until this year, there was no way for U.S. investors to get single-country exposure to Israel's growing economy, but now there are two options: the iShares MSCI Israel Index (EIS)  and the brand-spanking-new NETS TA-25 Index (TAV) from Northern Trust.

Since its launch on March 28, EIS is up 14.6%. Teva Pharmaceuticals (TEVA), the world's largest generic drug maker, is the largest component in the fund at 21.9% of the holdings. EIS is also heavily weighted in industrial materials (22.1%) and financial services (21.2%). EIS's expense ratio is 0.68%.

TAV, launched on May 21, focuses on the Tel Aviv 25 Index, the most commonly used local index. The exposure to individual companies is a little more spread out, and no company is weighted more than 9.2%. Teva comes in with an 8.8% weighting. Financials make up 29.8% of the fund, followed by materials (21.7%), telecom (13.5%) and health care (12.4%). The expense ratio is 0.7%.

ETFs Get a Rise from Japan's Stock Performance

Japan's stocks rose by their largest amount in two months, giving a lift to the country's ETFs.

The jump came after orders for durable goods in the United States notched an unexpected increase in April, which helped ease concerns that an economic slowdown would curb spending. The United States is Japan's largest export market, report Masaki Kondo and Toshiro Hasegawa for Bloomberg.

Japan's increased retail sales also rose by a small amount last month but the sales aren't better for the reasons you'd think.

They rose 0.1% thanks to more spending on gas and cars, reports Kaori Kaneko for Thomson Financial News. The reading was also the worst since July 2007, when they fell 2.3%. Between August 2007 and this March, they rose.

In April, fuel retailers reported a 3.4% increase. Auto retail sales were up, too, by 4.2%. But sales at large retail stores fell 2.2%.

Some of Japan's ETFs benefited from the good news, including:

• iShares MSCI Japan (EWJ), down 0.6% year-to-date
• PowerShares FTSE RAFI Japan (PJO), down 4.9% year-to-date
• SPDR Russell/Nomura PRIME Japan (JPP), up 0.% year-to-date

Portugal Now Accessible With New NETS ETF

The Portuguese economy has experienced short-term inflation along with a slight slowdown because of the international credit crisis, but investors still find this country agreeable for investment and worthy of its own ETF.

Portugal is now accessible to investors, thanks to Northern Trust, which launched the NETS PSI-20 Index Fund (LIS), which is tied to the Euronext Lisbon exchange's index of the largest and most liquid stocks trading on its main market, reports Heather Bell for Index Universe.

Portugal's central bank governor cautioned that the country may enter 2009 in an economic slowdown. As with other euro-zone countries, higher oil prices have taken their toll on the economic growth, reports Dow Jones NewsWires on FX Street.

Portugal was the only country of the 15 euro-zone members to suffer an economic contraction during the first quarter. The good news is that efforts will be focused on avoiding second-round effects of the contraction, by upping domestic companies' competitiveness and attracting foreign investment.

Comments

[Everyday Fi...:]

Nice article, I like Israel's prospects. I'd just point out that for years, the Amidex fund has held the top several Israeli stocks and has performed in stellar fashion. Here's a full post and background on the fund. As it's got a longer track record, may be worth contrasting with the higher expense ration than the options you listed and see which is best for you:

everydayfinance.blogsp...

PS fortunately, I got out of BPHX a long time ago.

2008 May 30 09:57 PM