I’ve had some incredibly interesting conversations in the last few weeks about the geopolitical and economic struggle between the US and China. But what does that battle “mean” for investors – and where should you turn as it unfolds?
Take a look at my MoneyShow Chart of the Day. It shows the year-to-date performance of five benchmark iShares ETFs – one each tracking stock markets in China, India, South Korea, Taiwan, and the US – plus a VanEck fund focused on Vietnam. The performance spread is truly phenomenal, ranging from a loss of 10.1% for the iShares MSCI India ETF (INDA) to a whopping gain of 104% for the iShares MSCI South Korea ETF (EWY).
MCHI, INDA, EWY, EWT, VNM, IVV (YTD % Change)
Data by YCharts
What’s most surprising about this? I’m old enough to remember investment concepts and terms like “Chindia” and “BRICs.” Those were nicknames for blocs of geographically and economically diverse countries that were lumped together for easier investor consumption. The idea was that they “should” roughly trade together. Now, that seems fanciful and dated.
EWY is benefitting from the enormous semiconductor boom – and the fact SK Hynix and Samsung Electronics Co. make up about 55% of the fund! The iShares MSCI Taiwan ETF (EWT) is riding the same wave. Taiwan Semiconductor Manufacturing Co. (TSM) accounts for 19% of the fund, while technology stocks overall make up 77% of its holdings.
On the flip side, you have China struggling with trade and economic issues. Smaller nations like Vietnam are slightly outperforming as manufacturing migrates there, though they’re not delivering the returns investors might have hoped for.
As for India? It’s lagging due to foreign investor outflows and inflationary pressures. That’s happening even as some experts have said it should benefit from global investors leaving mainland China in search of profit opportunities elsewhere in Asia.
Bottom line? You have to be more discerning and thorough as a global investor these days. With the US and China battling it out for geopolitical and economic dominance, some markets are benefitting. But some aren’t. Knowing which is which can make a big difference in your returns!
