A Closer Look at Country ETFs: Importers vs. Exporters

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Includes: CEE, EWG, EWN, EWP, EWQ, EWU, EWY, FXI, IFN, VTI
by: Gary Gordon

Nothing in the world of investing will ever come down to a single statistic. Yet I am intrigued by the idea that U.S. troubles may be, in part, tethered to its permanent status as a net importer.

So I decided to peruse the latest Economist for trade balance stats. I decided to separate the 5 largest net importers from the 5 largest exporters to see if one might find any discernible discrepancies between the groups.

Country ETFs: 5 Year Returns For Net Importers and Net Exporters
Net Importers 5-Year Total %
Vanguard Total U.S. Market (NYSEARCA:VTI) 12.8%
iShares MSCI United Kingdom (NYSEARCA:EWU) 10.7%
iShares MSCI Spain (NYSEARCA:EWP) 91.7%
iShares MSCI France (NYSEARCA:EWQ) 35.1%
The India Fund (NYSE:IFN) 129.4%
Net Exporters
iShares FTSE China 25 Index (NYSEARCA:FXI) 173.9%
iShares MSCI Germany (NYSEARCA:EWG) 53.9%
Central Europe/Russia Fund (NYSE:CEE) 91.3%
iShares South Korea (NYSEARCA:EWY) 90.5%
iShares MSCI Netherlands (NYSEARCA:EWN) 46.3%

There were slight percentage gains to be accumulated by leaning towards the “makers,” like the Dutch and the Germans, over the “takers,” such as the French and the English. ETFs for the Netherlands (EWN) and for Germany (EWG) shined brighter than ETFs for France (EWQ) or for the U.K. (EWU).

A quick glance also seems to point towards developing countries scoring far larger percentage returns than developed countries, and the former tend to be more export-dependent. That said, investing success in Russia, South Korea and China may have more to do with overall economic growth and less to do with the singular concept of “net exporter.”

The best example here is India. Few nations have amassed as much investor interest, color commentary and genuine track record gains as India. And yet, India regularly takes in tens of billions more in merchandise in every 12-month rolling period.

Here, however, I must admit a bias. I continue to favor countries like China and Brazil over India due to international trade. Granted, India’s importing ways lead many to believe in a rising consumer class. Nevertheless, Chinese citizens and Brazilian citizens are increasingly opening up their wallets, while the manufacturing/basic industry base remains very robust.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.