BigTrends

We previously examined the performance of various country-specific ETFs in 2010 and Japan (EWJ) and Russia (RSX) were standouts.  This trend has shown no sign of abating, and may well continue throughout 2010.  In particular Japan, which has been a "dead money" market for about 20 years now, may be poised for relative outperformance gains in 2010 vis-a-vis some other major country ETFs.

The other international ETFs profiled in the chart include India (PIN) in purple, Canada (EWC) in white, Australia (EWA) in blue, China (FXI) in green,  Germany (EWG) in orange, and Brazil (EWZ) in yellow.  Brazil is the laggard of these countries thus far this calendar year.

If you don't buy my assertion that Japan may outperform this year and prefer to bank on a rebound by the current bottom performer Brazil, then one could attempt to "fade" the current trend by going long EWZ (through stock or options) and shorting EWJ for roughly the same amount.  That would be considered a "paired" or hedged trade.

Examining the Top 10 holdings of the iShares MSCI Japan Index (EWJ), it looks to be a pretty well-diversified ETF.  Only 1 of the Top 10 holdings is over 3% of its assets, that being Toyota at 5.4% as of the latest reporting.  Certainly the recent troubles of Toyota USA should be taken into account when trading or investing in the EWJ.



ETF Relative Performance Chart

Much focus and attention these days among investors, traders, politicians, and the media is on China.  With good reason.  Demographics and a growing economy may make this the "Century of China".

However, there is another Asian economy and market that you shouldn't forget about:  India.  This is a country with a massive population and growing education and business base.  Incremental increases in the growth of lower and middle classes in countries like India and China can have earthquake-like fiscal effects.

Take a look below at the relative performance of the Powershares India ETF (PIN) versus the iShares Xinhua China Index (FXI).  You might be surprised to see that the India ETF PIN has outperformed the China ETF FXI since the March 9th, 2009 market bottom.

FXI vs PIN Price Performance Chart

Here are the top holdings of the PIN ETF (as of 9/30/09):

The India stock market is up huge after election results look to have marked a shift away from Left leaning parties.  Expectations are high there for economic reform, infrastructure growth, increased foreign investment and tax reform.  An India ETF, PIN, is currently up about 20%.    China may be feeling some positive effects from this huge bump, as the FXI is up 4.5% currently.  While this does sound like significant political news, be careful of jumping on board after such a strong reaction has already occurred.  If I had to guess, there will be a settling down/mild pullback after the initial euphoria wears off, but then the uptrend may continue.