While the SPDR fund’s holdings are dominated by large-cap stocks like Chevron and Exxon Mobil, almost 64% of the ALPS fund’s equity exposure is focused on small and mid-cap stocks. Although both groups have lagged the performance of 2023’s dominating mega-cap companies, the future could be very different.
iShares China Large-Cap ETF (FXI)
Even before Moody’s recently downgraded China’s credit rating to negative, the country was struggling. The lockdowns during the global pandemic hurt China domestically and globally, and some international companies that depended heavily on the country for manufacturing began moving those operations elsewhere.
The souring investor sentiment can be seen firsthand in the iShares China Large-Cap ETF (FXI). The fund, which has fallen around 15% in 2023, is among the worst single country ETF performers. It fell by 20.66% in 2022 and by 20.05% the year before that—all told, falling 55% in the past three years. Where have all the Chinese equity bulls gone?
Summary
While the group of unloved ETFs listed here are certainly not guaranteed a quick rebound, they might be a bottom-feeder’s delight, or at least that of a hard-core contrarian.
Out-of-favor ETFs may take longer to develop into winners. But the gains, when and if they arrive, could be quite significant.
Still, it’s much easier said than done.