Five International Small-Cap ETFs To Watch In 2011

As we noted last week, the outlook for small-caps in 2011 is strong, at least as far as the Russell 2000 is concerned, but focusing on that index only exposes investors to U.S.-based small-caps. While there are no guarantees, it's not unreasonable to bet that if U.S. small-caps are doing well, then their international peers are as well. That said, that is not an endorsement of only emerging markets small-caps ETFs, which certainly had their day in the sun in 2010. There are now plenty of country-specific small-cap ETFs and it is possible for investors to build a global small-cap portfolio with small allocations to each fund. Try these names on for size. 1) IQ Canada Small Cap ETF CNDA: CNDA mades its debut last year and while GDP growth in Canada this year isn't exactly going to impress, materials and energy names combine for 74% of the ETF's weight, making it an interesting play. 2) IQ Australia Small Cap ETF KROO: Like CNDA, KROO and its cute ticker made its debut last year and is resources and materials heavy, making it a potentially profitable idea for 2011. 3) Market Vectors Brazil SmallCap ETF BRF: An obvious choice after its stellar run in 2010, BRF is heavily exposed to the emerging middle class in Brazil. The best thing that could happen for BRF this year is for the market to realize BRF doesn't really have much to do with Brazil's export economy and that would insulate the ETF from Chinese rate hikes. 4) SPDR Russell/Nomura Small Cap Japan ETF JSC: We previously highlighted all three Japan-specific small-cap ETFs and a rebounding Japanese economy should benefit all three, but JSC's exposure to Japanese exporters is compelling assuming the yen weakens. 5) WisdomTree Emerging Markets SmallCap Dividend ETFDGS: DGS spent much of 2010 flying under the radar despite the emerging markets theme dominating the ETF world. An alluring combination of small caps and dividends, DGS will get you involved with 2010 high-fliers like South Africa, Taiwan and Thailand, among others. The question is will those markets outperform again this year. Investors should also not IndexIQ has filed plans for an Indonesia-specific small-cap, which may debut this year.