Investors can consider many different factors when looking to an ETF, but tech action offers a view that stands out from the others. Understanding a tech chart offers one view on a strategy outside of its investing approach, AUM, or performance. It can also signal investors to consider a given ETF in the ever-growing ecosystem. In this case the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE ) is seeing action that bears a closer look.
The emerging markets ETF has repeatedly seen its price rise above its 200-day Simple Moving Average (SMA) over the last few weeks. Traditionally, that has indicated healthy momentum for a strategy and tends to invite new scrutiny. In this case, the strategy’s repeated rise adds even more attention. Per the chart below, it seems that while the ETF’s price has risen notably since October, it seems to be hitting a resistance point at about $28.
What part of its strategy, then, could be drawing attention and potentially then see its price break through that resistance? XSOE will hit its tenth anniversary as an ETF next year, charging 32 basis points (bps) to track the WisdomTree Emerging Markets ex-State-Owned Enterprises Index. The index takes a market cap-weighted approach to emerging market firms excluding state-owned enterprises.
Emerging Markets ETF XSOE's Approach
Those firms tend to dominate financial and energy sectors in emerging markets, which can put some off of otherwise appealing companies. State-owned firms, to many investors, can operate inefficiently or be corrupted by government. Avoiding them could boost XSOE’s performance. That could also add to its appeal as a vehicle for investing in China, for example, which does see a notable amount of public and private intermixing.
The emerging markets ETF defines a state-owned enterprise as one with more than 20% government ownership. The strategy also applies various cap, liquidity, and tradability screens. That approach has helped XSOE return 3.3% over the last five years, outperforming both its ETF Database Category and Factset Segment averages. Taken together, its ongoing tech action could see investors consider it as a new strategy looking ahead to 2024.
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