International ETFs can add to a portfolio’s exposure originated in markets abroad.
Below I present four different international ETFs with a variety of underlying instruments, including foreign stocks, U.S. dollar denominated bonds and local currency denominated bonds.
iShares China Large-Cap ETF (FXI)
The ETF tracks the FTSE China 50 index, composed of large-capitalization Chinese stocks traded in the Hong Kong stock exchange.
FXI currently trades at 70% of its highest historical value, which was reached in 2007. The ETF price was up 3% in 2020.
It recovered into slightly positive territory after dropping 30% in value during the first three months of the year.
Listed options on FXI trade with expirations of up to two years. The ETF options trade with normal liquidity and volume.
iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)
The ETF tracks the J.P. Morgan EMBI global core index composed by U.S. dollar denominated government bonds, issued by entities domiciled in emerging markets countries.
EMB currently trades at above 90% of its highest historical value, which was reached in 2012. The ETF price was up 1% in 2020.
It recovered by year end into positive territory after dropping 20% in value during the first three months of the year.
Listed options on EMB trade with expirations of up to two years. Options contract volumes are low, and liquidity is concentrated in short term contracts with strikes located around the current price of the ETF.
The ETF makes periodic distributions of the interest received from underlying bonds it holds. It currently has a dividend yield of 4% per year.
Shares MSCI Emerging Markets ETF (EEM)
The ETF tracks MSCI emerging markets index, which is designed to measure equity market performance in global emerging markets. The underlying index is composed of stocks from large and mid-capitalization companies.
EEM currently trades near its highest historical value, at levels it had previously reached in 2007. The ETF price was up 13% in 2020. It recovered after dropping more than 30% of its value in the first three months of the year.
Listed options on the ETF trade with expirations of up to two years with normal liquidity and volume.
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF (EBND)
The ETF tracks the Bloomberg Barclays EM local currency government diversified index. The index performance is based on fixed-rate local currency sovereign debt issued in emerging market countries.
EBND provides combined exposure to sovereign and local currency risk.
The fund currently trades at around 80% of its highest historical value, which was reached in 2013. The ETF price was slightly up in 2020. Its value recovered to near flat for the year after a 15% decrease during the first three months of the year.
Listed options on the ETF trade for short term expirations. Options volume and liquidity are low.
EBND makes periodic distributions of the interest received from underlying bonds it holds. It currently has a dividend yield of 3%.
Disclosure: I currently hold EMB shares.
