NAVIGATING THE WORLD OF COUNTRY ETFs
There is always a “bull” market somewhere around the world. Thanks to indexers and ETF providers, we now have a multitude of ETF instruments to gain exposure in dozens of countries’ stock markets.
Every time I attend an ETF conference or read ETF-related news, I notice that speakers and authors tend to focus on how wonderful some country based ETFs performance was this year, and how those ETFs significantly outperformed broad-based benchmarks.
According to the graph below, the ETFs of the following countries were better investment choices than the S&P 500 in 2014:
1. India (EPI, WisdomTree India Earnings ETF®)
2. Thailand (THD, iShares MSCI Thailand Capped®)
3. Indonesia (IDX, Market Vectors Indonesia ETF®)
Interestingly enough, many financial advisors who attend these conferences or read these research papers often find themselves in the position of “missing the train” when they discover these past opportunities.
In my opinion, the main reason why we tend to miss these opportunities is because while there are many investment products and opportunities (over 1500 US-listed ETP products), there are not many high quality tools that help investors recognize the best investment opportunities early and without time-consuming research efforts.
Source: www. etfdb.com
In many cases, price advances in country ETFs are unexpected, and are not accompanied with wide media coverage. Most analytical tools will capture these instruments only after significant price improvement relative to the major benchmarks. Therefore, the investment public tends to buy them at a much higher price, hoping for a continuation of the positive price move in the future.
The top 3 country ETFs of 2014 are good examples of what happened after an initial price advance in 2014. We see that in some cases trading volume increased, but at the same time price advance was replaced mostly with a less profitable sideways action and increased uncertainty about future price direction.
Good tools for ETF Strategists are hard to find, especially ones that can accommodate all types of strategies: short term, intermediate or long term, contrarian, conservative or aggressive ones.
The early price stabilization and recognition process can be very difficult. That’s when traditional analysis systems are often helpless and continuously produce false positive signals.
Analyzing the over 1,500 ETFs available today is a very time consuming process. It is important to have a reliable method of analysis with the right amount of data sensitivity. Quants will tell you that appropriate data sensitivity is very important. It takes years to develop a good market analysis system that works!
When I first discovered the QAS quant method in 2012, the first thing that came to my mind was that this system has great data sensitivity that significantly expands the analyst’s toolkit. It has a lot more information about market price, because it utilizes a more granular level of analysis for each of the five traditional phases within a price cycle: bottoming, advance, topping, correction and decline. The QAS system can be compared with a closed ecosystem that consists of over one hundred quantitative profiles or ratings that explain traditional five with a greater level of sensitivity.
For a more practical use, QAS created its own risk framework that grouped all quantitative ratings into seven comprehensive risk zones where Zone 1 represents the lowest risk and Zone 7 – the highest.
Zone 3 is called “Early Stabilization”, and is specifically dedicated to recognize early stabilization of price.
Currently, QAS ETF Strategist Online service calculates zones information daily on 800+ major US-listed ETFs including all country-focused ETFs.
Don’t miss the train this year! Take advantage of a free trial at: