Wednesday, March 20, 2013

Two foreign funds have broken the US hold on the top 10 this morning, no not Cyprus and Russia.  These two share our language and they both have welcomed stronger currencies.  Would you rather invest in a country with a weakening or a strengthening currency?  They said the sun never sets on the British Empire and when it’s daytime in Canada it’s night in Australia. The iShares MSCI Canada Index Fund (EWC) holds Quant’s 3rd place rank this morning and their Australia Index Fund (EWA) comes in at 10th place.

EWA had been keeping pace with our broad market year to date but a 3% correction this week has dinged its technical score but brought out enough bears to boost its sentiment score.  Combined with a decent 70.3 Fundamental Score leads to today’s 9.72 Green Diamond Reward Rating.  EWC on the other hand has lagged this year which explains its middling Behavioral Score of 67.8 but the market may be missing a gem as it sports a very nice 81.5 Fundamental Score.  Those numbers combine to give EWC and even better 9.88 Green Diamond Reward Rating.  Strong currencies are good for a nation’s financial sector which accounts for almost half of AUM in EWA and more than 35% of EWC.  Materials are EWA’s second largest sector with almost 20% and Energy makes up another 25% of EWC. Besides their strong Reward Ratings, both funds also carry low Red Diamond Risk Ratings of 3.63 for EWA and an even better 3.2 for EWC.

If you are looking for a sugar fueled short term trade you may want to stick with the weakening currencies.  But if you are looking to invest internationally for any meaningful period of time you will have to transfer those foreign currencies back into US dollars eventually.  The Aussie and Loonie have proven to be attractive places for such an investment and our models find other attractive aspects to these funds today.   Both ranked and performed well last fall but EWC began to falter late last year when it fell out of Quant’s top 100 on Christmas Eve. Its performance has had a time out but the fund began to score better early this month so our models suggest it’s ready to join the party again.  Thank you for joining the party here at ETF Global, happy spring!

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