These are the best ETFs to play the boom in international stocks, Bank of America says

Published Tue, Feb 14 202310:30 AM EST

Jesse Pound @/in/jesse-pound @jesserpound

International stocks are off to a hot start in 2023, with the U.K.'s FTSE 100 hitting an all-time high and China's reopening boosting Asian markets, prompting Bank of America to look at which ETFs benefiting from the trend are solid long-term investments. International equities have outperformed their U.S. counterparts by more than 4%, but investors should choose carefully, said Jared Woodard, investment and ETF strategist at Bank of America, in a note to clients on Monday. "Investors should own regions with the greatest structural advantages, such as strong demographics, energy independence, and high productivity," the note said. Woodard then listed several different styles of ETFs that can fit into investors' long-term plans. "International dividends ( GCOW ), emerging markets ex-China ( EMXC ), and Canada ( FLCA ) should comprise long term international holdings," the note said. The Pacer Global Cash Cows Dividend ETF (GCOW) is the sister fund of the $13 billion Pacer 100 Cash Cows ETF (COWZ) . The global version is already off to a solid start in 2023, with a total return of about 6%. Dividends and other sources of income have been a hot area for investors since last year, when inflation moved and interest rates rose sharply. The GCOW ETF has a 30-day SEC yield of more than 5%. And while China has been the source of some of the outperformance for international stocks in 2023, many investors are still cautious about being too exposed to the country, due to regulatory and geopolitical risks. That could make funds like the iShares MSCI ex-China ETF (EMXC) attractive. The fund, which has $3 billion in assets and an expense ratio of 0.25%, already has a total return of more than 5% in 2023. The Canadian market, as represented by the Franklin FTSE Canada ETF (FLCA) has a heavy weight in financials, as well as transportation and energy minerals. That fund tends to underperform when markets are in a risk-on mode, but it does fit into the value trade that was popular in 2022. The Canada fund has a total return of more than 8% year to date. Additionally, Woodard said that investors looking to make a short-term trade should consider Japan as a "market to rent" due to a strong 2023 outlook but long-term demographic concerns.