If you remember this past summer’s stock-market swoon in China, you might be surprised to see Chinese plays topping all others in an end-of-year ranking.
And some investors argue those investments could keep performing well in 2016.
An exchange-traded fund holding Chinese stocks ranks No. 1 in the list below showing 2015’s 10 top-performing foreign equity ETFs.
The Market Vectors ChinaAMC SME-ChiNext ETF CNXT, -0.09% — up 46% in the year to date — is joined by three other Chinese plays in the top 10, according to performance data from XTF.com as of Dec. 29. The Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF ASHS, -0.54% is at No. 3 with its roughly 30% jump in 2015, and the PowerShares Golden Dragon China ETF PGJ, -1.68% and the KraneShares CSI China Internet ETF KWEB, -1.28% are both up about 20%, XTF.com data show.
Even with their sizable gains in 2015, these four ETFs haven’t attracted that much investor money, with each having less than $200 million in assets under management, according to ETF.com data.
2015’s 10 biggest winners among country ETFs
ETF name Ticker % gain YTD
Market Vectors ChinaAMC SME-ChiNext ETF CNXT 46.03
WisdomTree Japan Hedged Health Care ETF DXJH 38.01
Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF ASHS 30.15
iShares MSCI Ireland Capped ETF EIRL 24.35
iShares MSCI Denmark Capped ETF EDEN 22.29
PowerShares Golden Dragon China Portfolio ETF PGJ 20.46
KraneShares CSI China Internet ETF KWEB 19.89
WisdomTree Japan SmallCap Dividend ETF DFJ 19.14
WisdomTree Japan Hedged SmallCap Equity Fund DXJS 18.08
iShares MSCI Japan Small Cap ETF SCJ 17.14
Source: XTF.com data as of 12/29/15 on all ex-U. S., country-specific, non-leveraged equity ETFs
Japan also makes a strong showing. The WisdomTree Japan Hedged Health Care ETF DXJH, -0.75% is at No. 2 in the list with its 38% rise in 2015, and other Japan funds take the last three spots in the top 10. ETFs for Ireland EIRL, -0.31% and Denmark EDEN, -0.01% round out the top 10.
“I think people will be surprised because the narrative doesn’t meet with the results.”
Brendan Ahern, chief investment officer at KraneShares, which runs KWEB and other China-focused ETFs
But overall, China looks like it was the best country for investors in 2015 — in this list, at least. This isn’t taking into account a wide range of problems, such as the volatile ride that investors focused on China endured in 2015, or the country’s unimpressive ratings for ease of doing business. The list just looks at year-to-date performance for all ex-U. S., country-specific, non-leveraged ETFs, using data for U.S.-listed funds from XTF.com.
Other roundups put Russia and even Jamaica on top in 2015. A Deutsche Bank note said Russian stocks performed the best, if you look at major asset classes in local currency terms. Bloomberg said Jamaican stocks beat the rest of the world, though the Caribbean nation “lives on the fringe of frontier status.” That explains why Deutsche Bank left Jamaica out of its roundup covering major markets. In terms of the performance of U.S.-listed ETFs, the biggest Russian play — the Market Vectors Russia ETF RSX, -2.42% — is roughly flat for the year, and there is no Jamaican ETF.
Investors might be astonished at how 2015 turned out for some Chinese stocks, said Brendan Ahern, chief investment officer at KraneShares, which runs KWEB and other China-focused ETFs. He suggested many ETF investors may have written off China, given that the two biggest plays — the iShares China Large-Cap ETF FXI, -1.61% and the iShares MSCI China ETF MCHI, -1.19% — are both losers in 2015.
“I think people will be surprised because the narrative doesn’t meet with the results,” Ahern told MarketWatch. “An investor just quickly looking, they’d say, ‘Oh, FXI and MCHI are down year to date. China is facing this headwind of tepid growth, which hurts manufacturing. I want to avoid China.’”
It is important to know what KraneShares has marketed as the “Tale of Two Chinas,” Ahern said. “Yes, the traditional part of the economy is struggling today,” he said, referring to the part tied to manufacturing and commodities. But investors focused on Internet firms and consumer-oriented companies should continue to see good results in 2016, according to the KraneShares executive. The ETF company has argued that such companies will benefit from Beijing emphasizing technology and domestic consumption. Analysts have made similar points about bets that line up well with the “new” China’s goals.
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