Four ETFs Impacted By Nationalized Industries

Remember during the dark days of the financial crisis when Uncle Sam attempted to play value investor by taking stakes in a variety of U.S. companies? AIG AIG, GM GM and scores of banks were among the recipients of Uncle Sam's investing affections. Fortunately for those of us that live in the U.S., it's not commonplace for our government to nationalize industries. Nationalized companies have a way of disappointing investors. Just look at Brazilian oil giant Petrobras PBR. The Brazilian government is that company's largest shareholder and over the past year, all of the company's U.S. and European rivals have outperformed their Brazilian rival. Oh yeah, the Petrobras dividend is pathetic compared to U.S. and European integrated oil companies. ETFs that are heavy on Petrobras, of which there are plenty, are not the only funds that can be vulnerable to already nationalized or soon-to-be nationalized industries. The practice is far more common than Western investors may want to believe. Have a look at this list of ETFs that could be vulnerable to the nationalization phenomenon. Global X FTSE Argentina 20 ETF ARGT: We want to like ARGT, but one big issue with this ETF is nationalization. And that's in addition to high inflation and unemployment. President Cristina Fernandez de Kirchner has mandated that oil, gas and mining companies operating in the South American country repatriate all future export revenue back into the local economy. That's not quite nationalization, but telling companies that their export revenue must be kept in Argentina is going to lure a lot of foreign investment and it is a flight of foreign capital that Argentina is trying to fight, according to Bloomberg. SPDR S&P International Energy Sector ETF IPW: A recent UCLA study shows that 80% of oil-producing countries have nationalized their industry over the last century, according to EconoMonitor, and that's why IPW makes this list. Really, any equities-based oil ETF could make this list, but when Royal Dutch Shell RDS, BP BP, Total TOT and Eni E account for over 40% of an ETF's weight, it's safe to say that ETF could be affected by nationalization. Look at some of the non-developed markets those European oil giants operate in and you'll see what we mean. iShares MSCI Peru All Capped Index Fund EPU As we've noted several times this year, EPU has faced headwinds following the election of President Ollanta Humala. To this point, Humala hasn't taken any overt actions to nationalize Peruvian industies, but as a former extreme leftist and pal of Venezuelan President Hugo Chavez, Humala could walk down Nationalization Avenue at any moment. Market Vectors Vietnam ETF VNM: As a communist country, Vietnam is home to plenty of nationalized industries. When it comes to how that impacts the Market Vectors Vietnam ETF, the affect is significant. Vietnamese banks, energy and materials companies are mostly nationalized. Those three sectors combine for about 75% of VNM's weight. Using ARGT and VNM as examples, one could also argue countries with proclivities for nationalization are also home to high inflation.