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3 ETFs That Will Benefit From Capital Shifting Abroad

Look to these foreign ETFs as valuation differences create opportunities

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iShares MSCI New Zealand (ENZL).

Developed Asia-Pacific funds often focus on Japan and Australia, excluding significant contributions from smaller nations like New Zealand. Yet HSBC Bank forecasts annualized economic growth of 3.4% in 2014 for the “Kiwi” crowd. Not only is that the fastest pace in seven years for the island nation, but the solid gross domestic product (GDP) means that New Zealand will not need to engage in any controversial forms of monetary gamesmanship. It is true that the country’s well-being is often tied to the fortunes of Australia. That said, iShares Australia (EWA) is known for rising and falling alongside demand for global materials. In contrast, ENZL is diversified across a wider range of sectors, including health care, consumer discretionary and industrials.

Solid economic fundamentals are only one piece of the puzzle. ENZL is also a probable beneficiary of the “yen carry trade.” Currency traders worldwide sell yen to buy higher-yielding currencies like the New Zealand dollar and/or the Australian dollar. ENZL should benefit from this practice. ENZL also offers an enviable 4% annualized yield that is desirable in a rate environment that should be more stable in 2014. Keep in mind, since the May-June tapering swoon that crushed bonds and yield-oriented investments last year, ENZL has stayed above its 52-week lows.

ENZL 52 Week Lows

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