Overall, the list shows a few important trends:
- Financials are driving growth in some emerging markets – In both Turkey and Thailand, ETFs with a tilt toward financials have consistently outperformed.
- A few BRICs are crumbling – Brazil’s underperformance shows some cracks in the wall.
- Politics doesn’t always drive performance – While political instability was a big factor in the underperformance of Russia and Argentina ETFs, Egypt powered ahead, despite huge political and social unrest.
- Small caps don’t work everywhere – Small cap ETFs in Canada and Japan failed to deliver positive returns this year.
Below is my summary of ETF Database winners and losers at a glance:
Winners
MSCI Turkey Investable Market Index Fund (TUR, A-), Up 61.8%: Turkey’s market is hot right now, led by a booming financial sector and industrials, both of which get plenty of space in this index.
MSCI Philippines Investable Market Index Fund (EPHE, B), Up 47.6%: This growing economy provides excellent fodder for performance with this index of 50 publicly traded companies listed in the Philippines.
Egypt Index ETF (EGPT, C+), Up 46.0%: Despite intense political turmoil, Egypt’s economy is on the upswing after a year-long slump.
MSCI Poland Investable Market Index Fund (EPOL, B), Up 38.7%: Another emerging market hot spot that has managed to skirt the crisis. (It hadn’t yet adopted the euro in 2008.)
MSCI Thailand Index Fund (THD, A), Up 37.1%: More than 80 holdings with a focus on the hot Thai financial sector.
Losers
FTSE Argentina 20 ETF (ARGT, C+), Down 15.9%: In 2012, this was definitely a submerging market, with high inflation and political instability. But the government is trying to find a way to fix the problems, which bodes well for a better 2013.
Market Vectors Russia Small Cap ETF (RSXJ, C), Down 6.0%: Instability and riots in Russia haven’t done the markets any favours. This ETF wasn’t able to capture growth in the market.
IQ Canada Small Cap ETF (CNDA, C+), Down 5.4%: Small cap strategies don’t work in all markets. Canada’s energy slump has taken its toll on small caps in this country.
Japan AlphaDEX Fund (FJP, C), Down 4.9%: According to ETF Database, the strategy behind this ETF hasn’t managed to produce positive returns, even as Japan’s economy continues to grow.
MSCI Brazil Index Fund (EWZ, B+), Down 1.3%: Brazil was hot in 2011. Not so much this year—are Brazil’s best days behind it?