BRF VanEck Brazil Small Cap ETF

The year 2013 was rock solid for the global equity market and the ETFs world thanks to investor appetite for riskier assets, Fed easy money policies, solid earnings growth and improving global economies conditions (read: 2013 ETF Asset Report: Developed Markets Rule, Gold Falters).
 
A healing job market, recovery in the housing market and robust retail sales are boosting growth in the largest world economy. In addition, the Fed decided to keep its interest rates at lower levels for sometime despite its plan to curtail the pace of the ongoing stimulus starting in January. This suggests increased confidence in the U.S. economy’s growth rate and job scenario as well as a bullish outlook for 2014.
 
Further, the two-year bipartisan budget deal eases spending cuts and political dysfunction, and erases the prospect of another shutdown, which was looming large across the global economy. All these positive news flows have propelled the equity market higher. The MSCI World Index as well as the major U.S. benchmarks – Dow and the S&P 500 – gained over 20% this year. 
 
While there have been winners in every corner of the space delivering smart returns in 2013, some of the sector/country ETFs are still lagging. These funds plunged in double digits, suggesting some more downside ahead in 2014 (read: 3 Hot Sector ETFs for 2014).
 
Metal Mining ETFs
 
The worst performer of 2013 globally is definitely the mining world, in particular gold and silver miners. Due to plunging metal prices and unfavorable market conditions, miners faced a rough year. Acting as leveraged plays on underlying metal prices, metal miners tend to experience bigger losses than their bullion cousins when there is a slump in the metal market.
 
Though there are several ETFs that were badly hit from these trends, two funds – Global X Gold Explorers ETF (GLDX) and Market Vectors Junior Gold Miners ETF (GDXJ) – have seen terrible performances in the metal mining ETF world. Both lost more than 61% of their value.
 
Out of the two, GDXJ is more popular with AUM of $1.1 billion and is cheaper than GLDX by 10 bps. The fund provides exposure to 50 stocks by tracking the Market Vectors Global Junior Gold Miners Index. Canadian firms take the top spot at 60.3%, though Australia (20.3%) and the U.S. (9.8%) round out the top three (read: Pain or Gain Ahead for Gold Mining ETFs?).
 
On the other hand, GLDX tracks the Solactive Global Gold Explorers Index and holds a small basket of 19 gold mining firms across the globe. Here also, Canadian firms dominate the fund’s return with 85% of total assets while Australia, U.S., and United Kingdom companies take the remainder.
 
Single Country ETFs
 
Most of the developed economies saw strong growth in 2013, but developing nations lagged thanks to taper talk speculation and a resultant surge in the dollar. In particular, three countries – Turkey, India and Brazil – have seen rough trading throughout the year.
 
The ETFs tracking these nations – iShares MSCI Turkey ETF (TUR), Market Vectors India Small-Cap Fund (SCIF) and Market Vectors Brazil Small-Cap ETF (BRF) – each lost nearly 30%. Some political issues in the nations have also dragged down these ETFs for most of the year (read: 3 Emerging Market ETFs to Watch for Political Issues in 2014).  
 
Generally, small cap funds tend to lose more from the slowdown in the economy compared to large caps and vice versa. However, this is not true for Turkey.
 
Though Turkey ETF is a large cap centric fund, it is one of the worst performing country ETFs as the nation has been struggling from protests in Istanbul. The outcome of this uncertain situation and upcoming elections in 2014 are making the fund less attractive (read: Is the Turkey ETF in Trouble Again?).
 
The bearish trend is expected to continue in 2014 as well across these nations resulting from the final QE taper, lower commodity prices, sluggish export, weak monetary policy and falling currencies.
 
Commodity Producer ETFs
 
Like the metal mining industry, commodity producers like those dealing with rare earth metals, uranium and fertilizer have also seen a bumpy road throughout the year due to subdued global trends and commodity-specific risks.
 
The Market Vectors Rare Earth/Strategic Metals ETF (REMX) plunged nearly 32% in 2013 and provides pure exposure to 21 companies primarily engaged in mining, refining and manufacturing of rare earth/strategic metals. From a country look, American firms dominate the portfolio at 27% of total assets, closely followed by Australia (15%).
 
The Global X Uranium ETF (URA) offers a pure play in uranium with more focus on uranium producers and less on nuclear energy producers. The fund holds 24 stocks in its basket with Canadian firms making up for the largest share at 59% while Australia takes the second spot at 23%. The ETF lost over 23% in the same time frame (see: all the Materials ETFs here).
 
The only ETF that offers exposure to the fertilizer industry is the Global X Fertilizers/Potash ETF (SOIL). Holding 24 stocks in its basket, country exposure is tilted toward the U.S. with 24% share while Israel, Canada, China and Australia also make up for a decent allocation. The ETF was down about 18% in 2013.
 
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MKT VEC-BRZL SC (BRF): ETF Research Reports
 
MKT VEC-JR GOLD (GDXJ): ETF Research Reports
 
GLBL-X GOLD EXP (GLDX): ETF Research Reports
 
MKT VEC-INDI SC (SCIF): ETF Research Reports
 
GLBL-X FERT/POT (SOIL): ETF Research Reports
 
ISHRS-MSCI TURK (TUR): ETF Research Reports
 
GLBL-X URANIUM (URA): ETF Research Reports
 
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