ETFs To Invest In The World’s Richest Countries

by on August 30, 2012

When it comes to trying to join the billion-dollar club, many investors tend to focus on the world’s wealthiest individuals. They harp on every word legendary investors like Jim Rogers, George Soros and the infamous Warren Buffett say, hoping to gain some sort of insight from these financial Gurus. Few, however, look at the bigger picture. Taking a more macro view of the world can reveal some interesting facts about where the wealth really lies. Given our long standing pedigree of some of the world’s most affluent people, many might automatically assume that the United States would take first place as the world’s wealthiest country. But in a recent report from Knight Frank and Citi Private Wealth , it was estimated that Singapore’s GDP per capita at US$56,532 (measured by purchasing power parity in 2010) is the highest in the world, topping Norway (US$51, 226), the U.S. (US$45, 511) and Hong Kong (US$45, 301) [see the best performing ETFs in 2012].

Rather than trying to invest like the richest people in the world, investors might want to consider putting their assets in the most affluent countries instead, since investments in these economies have historically provided both stability and lucrative opportunities. And thanks to the rapid evolution of the ETF industry, there are now several ways investors can fine-tune their exposure towards the world’s richest countries:

Singapore

MSCI Singapore Index Fund (EWS): EWS is by far the most liquid and popular option for achieving exposure to the Singaporean economy. The mega fund is home to over $1.5 billion in total assets and its shares exchange hands over 2 million times a day. Despite its massive size, EWS actually holds a relatively small and top-heavy basket of securities; only 34 stocks are included in the portfolio, and the top ten holdings account for more than two-thirds of total assets. Exposure is heavily concentrated in financial services stocks, followed by significant allocations to the industrials, real estate, and communication services sectors [see also Global Titans ETFdb Portfolio].

MSCI Singapore Small Cap Index Fund (EWSS): For those looking for more of a “pure play” on the local economy, EWSS is an appealing option, offering investors exposure to the small capitalization segment of the Singapore equities market. Like its all-cap counterpart however, EWSS holds a relatively shallow basket of holdings with exposure significantly biased towards real estate and industrials stocks.

Norway

MSCI Norway Capped Investable Market Index Fund (ENOR): This ETF was one of the earliest products to dedicate its assets to Norway’s economy. ENOR employs a unique weighting methodology that is designed to limit the weight of any single component to a maximum of 25% of the underlying index. But with only 50 securities in its portfolio, the fund grants most of its exposure to the top ten holdings,  with that select group accounting for well over half of total assets. And while ENOR is well diversified across market capitalizations, it does not spread exposure across many sectors;  the fund allocates over half of its assets to energy stocks.

FTSE Norway 30 ETF (NORW): Another broad-based fund, NORW is designed to measure the equity market performance in Norway. Considering ENOR and NORW’s investment objectives, it is not surprising to see that the two funds hold almost identical portfolios, with 9 out of 10 top holdings in each fund receiving approximately the same weighting. NORW, however, invests in about 30 securities as compared to its competitor’s 50 holdings. But for the cost-conscious investors, NORW may be a more appealing options as its expense ratio come in three basis points lower than ENOR at 0.50% [see Head-To-Head ETF Comparison Tool].

Hong Kong

MSCI Hong Kong Index Fund (EWH): With nearly $2 billion in total assets and an average daily trading volume of over 2.5 million shares, this ETF is without question the most popular fund to dedicate itself to Hong Kong’s economy. EWH invests in about 40 individual securities, with the majority of holdings being giant and large-cap companies. The fund features exposure to only a handful of industries and allocates the majority of its assets to real estate and financial services stocks.

MSCI Hong Kong Small Cap Index Fund (EWHS): This ETF focuses on the small capitalization segment of Hong Kong’s equity market, making it an appealing “pure play” option for investors wishing to gain exposure to the local economy. Despite the fund’s stated investment objective, EWHS is actually dominated by mid-cap stocks, which account for nearly three-quarters of total assets [find ETFs for every investment objective with the ETF Screener].

Hong Kong Alpha Dex Fund (FHK): Part of First Trust’s popular AlphaDEX lineup, FHK puts a new twist on the Hong Kong equity market. The fund employs a quantitative screening methodology that is designed to identify the stocks from a specific sphere that have the greatest potential for capital appreciation. The resulting portfolio consists of about 40 individual securities, the majority of which are large and giant-cap stocks from the real estate and consumer cyclical sectors.

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Disclosure: No positions at time of writing.