Investors will understand by now the value of looking outside the U.S. for equities exposure. Yes, U.S. stock indexes are mostly up so far in 2023, but they’re largely overvalued and beset by several looming challenges, from the recent bank crisis drama and all that portends to stubborn, sticky inflation and increasingly tight interest rates. For advisors looking for low-fee single nation ETFs to diversify away from the U.S., here are three that have performed well recently for an attractive fee.
Franklin FTSE Mexico ETF (FLMX )
Mexico has been a target of notable investor interest of late, with its proximity to the U.S. a major plus. Following the pandemic’s strain on global supply chains, Mexico has stood out to some as a more reliable and more consistently accessible manufacturing hub for U.S. firms like (MAT), expanding their footprint there.
FLMX charges 19 basis points (bps) and has returned the 1,578 bps YTD, far outpacing the MSCI ACWI Ex USA Net Total Return Index at 360 bps, according to YCharts. Adding $11 million over the last three months in net inflows, FLMX may yet face the challenge of a brewing dispute between Mexico and its biggest trade partner, the U.S., but its durability YTD may make it appealing despite that factor.
Franklin FTSE Taiwan ETF (FLTW )
Tracking the FTSE Taiwan RIC Capped Index or the same fee as FLMX charges, 19 bps, FLTW looks to semiconductor giant Taiwan for its equity exposure. Though beset by the background threat of geopolitical risk from China, Taiwan is looking forward to a new trade agreement with the U.S. FLTW has returned 1,324 bps YTD, again a far better performance than seen by the aforementioned MSCI Ex USA Index in that time.
FLTW has far outpaced FLMX in inflows over the last month, adding nearly $80 million in that time. FLTW’s largest holding is, of course, (TSM), with semiconductors remaining a key investment area not only for markets but also for governments as competition for leadership in the key tech area grows.
Global X DAX Germany ETF (DAX )
Rounding out the trio is a strategy that turns to a somewhat surprisingly resilient Europe, with Germany its key economic pillar. DAX tracks the DAX index, a market-cap-weighted, total return index of the 30 biggest securities on the Frankfurt Exchange.
While not currency hedged, DAX has still performed well against the MSCI Ex USA Index according to YCharts, returning 1,004 bps YTD. Charging 21 bps, the low-fee single nation ETF has added $4.5 million over the last three months.
With strategies available in markets around the world, investors and advisors have a variety of low-fee single nation ETFs to consider — and as the U.S. market continues to face challenges, it may be worth keeping an eye on them in the weeks ahead.
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