Renewed U.S.-China trade tensions and China’s apparent retaliation in the form of yuan devaluation sent the global market into a tailspin at the start of August. Volatility ETN iPath S&P 500 VIX ST Futures ETN VXX has gained about 32.2% in the past 10 days (as of Aug 12, 2019) while SPDR S&P 500 ETF (NYSE:SPY) (ASX:SPY) , Invesco QQQ Trust QQQ, SPDR Dow Jones Industrial Average ETF DIA) and all-world ETF iShares MSCI ACWI ETF ACWI have lost about 4.4%, 5.3%, 4.7% and 4.8%, respectively.
Inside the New Trade Spat
Trump announced plans to levy a 10% tariff on $300 billion of Chinese imports that aren’t subject to U.S. duties yet. The new tariff will be put into effect on Sep 1. Another $250 billion of Chinese goods are subject to a 25% U.S. tariff. Trump also indicated that the new round of tariffs might rise beyond 25%.
Beijing has so far retaliated with tariffs on $110 billion of American goods, including agricultural products. But as a retaliatory move to the new round of tariffs, China devalued its currency to an 11-year low on Aug 5 and stopped purchases of U.S. farm products. Post China’s action, stocks experienced the worst day of this year on Aug 5.
Fight to Safety
Such fights triggered recessionary fears in the U.S. market all over again. The 30-year U.S. bond yields are now close to an all-time low. The 10-year benchmark treasury yield slid to as low as 1.65% on Aug 12 from 2.66% noticed at the start of the year.
The global economy is speculated to slow down sharply in the near term. Several global nations resorted to rate cuts in recent times to jumpstart their economies (read: Play Global Bond ETFs to Join Central Banks' Rate Cut Euphoria).
Why International Value ETFs?
Given the falling rates globally, a look at the ETFs that offer benchmark-beating yields seem to be a good option. However, choosing a value investment is a great idea at the current level given a myriad of tensions including deterioration in the U.S.-China trade relation, slowdown in developed economies like Japan and the Euro zone as well as political uncertainty pertaining to Brexit.
Against this scenario, we highlight a few value ETFs from the global perspective that have stayed positive in the last five days (as of Aug 12, 2019), remained in the list of top gainers in the international value ETF pack and offer sturdy yields (read: Is 2019 a Year for Value ETFs?).
iShares Europe Developed Real Estate ETF IFEU: Up 1.48%, Yields 4.38%
The underlying FTSE EPRA/NAREIT Developed Europe Index measures the stock performance of companies engaged in the ownership and development of the European real estate market. It charges 48 bps in fees. Germany, United Kingdom, France and Sweden have double-digit exposure to the fund.
ALPS International Sector Dividend Dogs ETF IDOG: Up 1.1%, Yields 4.67%
The underlying S-Network International Sector Dividend Dogs Index identifies five high-yielding securities, based on regular cash dividends, in each of the 10 Global Industry Classification Standard sectors and is rebalanced quarterly. The fund charges 50 bps in fees. United Kingdom, Australia and Japan have a double-digit weight in the fund.
Franklin FTSE South Korea ETF FLKR: Up 1.1%, Yields 2.37%
The underlying FTSE South Korea RIC Capped Index is a market-capitalization weighted index representing the performance of South Korean large and mid-capitalization stocks. The fund charges 9 bps in fees.
WisdomTree International Dividend Ex-Financials Fund (TSX:DOO) : Up 0.5%, Yields 4.16%
The underlying WisdomTree International Dividend ex-Financials Index measures the performance of high dividend-yielding international stocks outside the financial sector. The fund is heavy on United Kingdom and Japan. It charges 58 bps in fees.
Xtrackers MSCI EAFE High Dividend Yield Equity ETF HDEF: Up 0.5%, Yields 5.57%
The underlying MSCI EAFE High Dividend Yield Index tracks the developed market performance. The fund charges 20 bps in fees. The fund is heavy on Great Britain, followed by Germany, France and Japan.
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iShares MSCI ACWI ETF (ACWI): ETF Research Reports
iPath Series B S&P 500
Invesco QQQ (QQQ): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
WisdomTree International Dividend ex-Financials Fund (DOO): ETF Research Reports
iShares Europe Developed Real Estate ETF (IFEU): ETF Research Reports
Franklin FTSE South Korea ETF (FLKR): ETF Research Reports
Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF): ETF Research Reports
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Zacks Investment Research