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.
Top value fund managers are ready for the small cap bear market to be done
During the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More
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.
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.
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)