Citi’s Global Quantitative Research team highlighted equities ranked by country attractiveness in their research note ‘Tactical Market Allocation – February 2014.’

The selection model covers countries for which ETFs are available and uses inputs such as fundamental and macro-economic indicators.

Overview global equities

Global equities across both emerging and developing markets were impacted adversely by the turmoil that engulfed currencies of certain emerging countries.

Investors moved about $10B out of US equity funds though fund flows to Europe and Japan were positive.

Long-term model performance

The model envisages a long position in the top 5 most attractive countries and a short position in the bottom 5 positions. The portfolio is held for a month with returns measured in USD.

The performance of the model is shown in the table below.


Current country-wise attractiveness ranking order

The chart below shows the latest readings generated from Citi’s model.

2-citi-quant-attractive-countries spain

The five most attractive countries are Japan, Germany, Spain, Hong Kong and Italy. Countries that ranked the lowest were Mexico, Brazil, Korea, Malaysia and Switzerland.

A long only strategy

The model was also evaluated with a long position only – across the most attractive markets. The performance in this case is as follows.

3-long-only spain

The February top-ranked countries…and their ETFs

Here is a list of the largest ETFs in the countries that are ranked as the most attractive in Citi’s latest evaluation.

Japan- iShares MSCI Germany Index Fund (ETF) (NYSEARCA:EWG), WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ)

Germany –  iShares MSCI Germany Index Fund (ETF) (NYSEARCA:EWG), First Trust Exchange Traded AlphaDEX Fund II

Spain – iShares MSCI Spain Capped ETF (NYSEARCA:EWP)

Hong Kong – iShares MSCI Hong Kong Index Fund (ETF) (NYSEARCA:EWH)

Italy – iShares MSCI Italy Index (ETF) (NYSEARCA:EWI)

…And the countries at the bottom of the heap

Mexico – iShares MSCI Mexico Inv. Mt. Idx. (ETF) (NYSEARCA:EWW)

Brazil – iShares MSCI Brazil Index (ETF) (NYSEARCA:EWZ)

Korea – iShares MSCI South Korea Index Fund(ETF) (NYSEARCA:EWY)

Malaysia – iShares MSCI Malaysia Index Fund (ETF) (NYSEARCA:EWM)

Switzerland – iShares MSCI Switzerland Index Fund (ETF) (NYSEARCA:EWL)