iShares are Expanding Single-Country ETF Offerings

iShares has a long list of single-country exchange traded funds (ETFs). Now the provider is getting ready to expand their popular lineup even further. The proposed funds cover everything from the United States to the Philippines.

More single-country ETFs are on the way for iShares, which already touts an impressive list of single-country ETFs. Cinthia Murphy for Index Universe reports that the latest group of proposed funds covers a some areas that are already backed by ETFs, along with some first-of-their-kind funds.

The ETFs are:

iShares MSCI USA Index Fund: The U.S. fund is a diversified ETF that will essentially be a mid- and large-cap portfolio that tracks an index investing in securities from companies in the top 85% of the domestic space by market capitalization.

iShares MSCI Brazil Small Cap Index Fund: iShares’ take on Brazil’s small-cap market is perhaps an attempt to replicate the success Van Eck has had in that segment with its version of a Brazil small cap fund, Market Vectors Brazil Small-Cap (NYSEArca: BRF).

iShares MSCI Egypt Capped Investable Market Index Fund: The Egypt ETF will track an index of 41 companies, with most sector allocations dedicated to financials, industrials and telecommunications services.

iShares MSCI Ireland Capped Investable Market Index Fund: The Ireland fund’s benchmark held 21 names as of October, and focused primarily on consumer staples, financials and materials.

iShares MSCI Russia Capped Index Fund: This will track an index that is a variation of the MSCI Russia Index, the MSCI Russia 25/50 Index. While the new fund will invest in the top 85% of Russia-listed companies by market capitalization, it will also take into account investment diversification requirements that apply to regulated investment companies (RICs), under U.S. law. This fund would go head-to-head with the Market Vectors Russia (NYSEArca: RSX).

iShares MSCI Philippines Investable Market Index Fund: The Philippines ETF will replicate an index of 28 companies, mostly in utilities, telecommunications and financials.

The debuting ETFs focused on Ireland, Egypt and the Philippines could be the first country-specific funds available to investors for each of those economies .

How to Profit by Swing Trading

It’s not exactly breaking news. A buy and hold strategy hasn’t worked for the last decade. You probably know as much if you’ve opened your retirement account statement lately. The Dow, S&P 500, and NASDAQ are all flat or down over the last 10 years.

It’s time to face facts, the old-time buy a few large-cap blue chips and hold them forever strategy has gone the way of the Dodo bird.

So, what’s the answer for this particular market?

Personally I swing. Swing trade that is.

I like swing trading for this market because it takes advantage of momentum… or trading in and out of stocks and sectors that are seeing a temporary boost. There’s no ‘buy and hope’ strategy at play here.

Let’s take a look at how swing trading works.

In a nutshell swing trading is… buying the lows and selling the highs. Ok, I know what you’re thinking… how do I consistently buy the lows and sell the highs? It seems like it is easier said than done.

Although there’s a lot of different ways to approach it, my favourite is looking for technically-based short-term trends. And taking a position to profit from the trend.

Here’s something you might not know; swing traders don’t care why a stock is trending. If the technical’s show there’s a trend, it’s not your job to figure out why. You just want to profit from it.

But here’s the catch… the stock market isn’t just flat over the last 10 years. It’s flat over the last few months too. Lots of volatility but no real trends.

You may be happy to see a flat market – especially after last year. But for swing traders like me a flat market is worse.

So how do you overcome a flat US market?

By not limiting yourself to just the stock market.

Here’s why. You won’t always find a trend in the US stock market. So I’ll trade foreign markets, bonds, commodities and even currencies. Until recently, access to these markets was difficult and often required separate trading accounts.

In the past, many individual investors found it hard to trade these markets. This helped give rise to the notion that a buy and hold strategy is the best way to invest.

Now, there’s an easy way to trade ASX stocks, foreign stocks, bonds, commodities, and currencies using momentum. It’s quick, cheap, painless and you can do it all from one trading account.

Want to know what it is?

That’s right, ETFs (Exchange Traded Funds). These are the one investment that can give you exposure to all of these markets. Today’s ETFs are revolutionizing the ability to trade currencies, commodities, and foreign markets. You can now really drill down and focus on specific subsectors of all these markets.

As I said… follow the trend. If you can’t find it in the US stock market, you now have easy access to an entire array of markets with ETFs.

I believe that the big money over the next few months and years will be found in the ’specialty’ ETFs that are popping up. The value of these ETFs can be derived from commodities like gold, currency pairs, corporate bonds, and any specific subsector you can think of. The list goes on and on.

And now you can go long or short with two or even three times leverage. Talk about spicing things up!

And remember as a swing trader you don’t care why the ETF is trending. The patterns and trends you use as a swing trader hold up regardless of the asset being traded. So you can apply the same technical analysis principles that you use with stocks.

Combining technical analysis, momentum trading, and specialty ETFs isn’t a bad way to trade this market right now. And it sure beats the heck out of buying a few blue chips and holding on for dear life!

ETFs Increasingly Dominate Trading

During the course of 2009, my trading transitioned from a lifelong habit of focusing primarily on single stocks to rapidly making exchange-traded funds (ETFs) my favored means by which to trade stocks and options. Just three years ago, ETFs accounted for less than 10% of my trading. In 2009, that number will be close to 80%.

The headline above could just as well apply to ETFs as a whole, where there are now over 100 issues that average in excess of one million shares traded per day. Just using ETFs from the million share club, an investor can go long or short stocks, use leverage, pick from a wide variety of sectors, tackle geographies as off the beaten track as Malaysia, make use of junk bonds and inflation-protected bonds, dive into commodities or real estate, and even take a position on the VIX. Better yet, most of these ETFs have options associated with them, which further broadens the investing opportunities that are available.

I am particularly fond of ETFs because of the broad range of asset classes, sectors, geographies and other investment ideas they make easily accessible. For the options trader, ETFs are a boon because these investment vehicles all but eliminate single stock risk in the form of earnings, M&A activity, executive shuffles, legal matters and a myriad of other company-specific events.

In 2010 I intend to give more attention to ETFs in this space in hopes of educating and encouraging those for whom the rapidly expanding ETF universe is a good fit for their trading goals and approaches.

Exchange Traded Funds on Total Trader

Exchange Traded Funds offer a broad and diversified exposure to an index of securities making them ideal for diversifying your investment portfolio.

ETFs are passively managed investment funds traded publicly on stock exchanges in the same manner as traditional stocks. An increasingly popular product, ETFs combine the benefits and ease of investing in stocks with the advantages of managed fund investing and ready-made diversification of index tracking.

ETF investing with Total Trader

• Lower management fees than traditional managed funds
• Easy access
• Intraday liquidity
• Bought and sold through major stock exchanges like stocks
• Linked to major market indexes
• Suits both shorter term traders or longer term investors that wants to diversify

ETF Growth

About ETFs

What are Exchange Traded Funds?

Exchange traded funds (ETFs) are index funds or trusts that are listed on an exchange and can be traded in a similar fashion as a single equity. Today, the number of ETFs available continues to grow and diversify. Investors can buy or sell shares in the collective performance of an entire stock portfolio, or a bond portfolio, as a single security. Exchange traded funds allow some of the more favourable features of stock trading, such as liquidity and ease of equity style features to more traditional index investing.

Each ETF tracks an index or benchmark, meaning the objective for an ETF is to replicate the performance of the index or benchmark that the ETF is tracking. ETFs track specific stock, bond, commodity or currency indices, some of which have a regional focus, while others have a sector focus, thus making them ideal for diversifying portfolios

ASX ETFs  

Domestic - Investing in ETFs is easy as they trade in exactly the same was as any other share on the Australian Stock Exchange.

Four of the major providers have ETFs and ETCs on issue on the Australian Stock Exchange. These providers include ETF Securities, iShares, State Street Global Advisers (SSgA) and Vanguard Investments.

ASX code of popular Domestic ETFs (ASX Code – Fund Name)

SFY – SPDR S&P/ASX 50 Fund
STW – SPDR S&P/ASX 200 Fund
SLF – SPDR S&P/ASX 200 A-REIT Fund

Click here for a full list of ETFs availiable on the ASX

Commodity ETFs

Exchange Traded Commodities (ETCs) are similar to ETFs, except they track the performance of an underlying commodity index rather than stock market index. ETCs are also traded in the same manner as stocks but provide exposure to a range of commodities and commodity indices, which include energy, agricultural, metals and softs.

ETCs are open-ended securities, like ETFs, and are also asset backed by physical bullion or commodity (futures) contracts.

Benefits of Commodity ETFs:

• Easy access the markets – ETCs are traded as stocks on major  exchanges
• Low cost (yearly Management Expense Rates as low as 0.39% for some ETCs)
• High liquidity (matching the underlying commodities physical or futures markets)
• Daily transparent pricing
• No margin calls, need to roll contracts or risk of delivery associated with Futures

Emerging Markets ETFs

ETFs are a great way to invest in often difficult to access emerging markets such as China, India and South America. An emerging market economy is defined as an economy with low to middle per capita income. Such countries constitute approximately 80% of the global population and represent about 20% of the world’s economies.

Major ETF Providers

http://www.claymore.com/etfs - Claymore Securities offers a lineup of ETFs that track key market segments.

http://www.holdrs.com - HOLDRs (Holding Company Depository Receipts) are a group of unmanaged sector portfolios developed by Merrill Lynch that do not track specific equity indexes.

http://www.iShares.com -  iShares are a family of ETFs managed by Barclays Global Investors (BGI). Products cover multiple asset classes including stocks, bonds, and commodities.

http://www.iPathetn.com -  iPath are a series of ETNs managed by Barclays Bank that cover currency, commodity and emerging market indexes.

http://www.powershares.com -  The PowerShares offers a family of ETFs that utilize a proprietary model called Intellidex to screen a large group of stocks for those that have the best potential for capital growth. Each ETF portfolio strives to keep market exposure to specific segments within the U.S. economy and is rebalanced quarterly.

http://www.proshares.com -  ProShares offers a lineup of ETFs that are leveraged and inverse performing funds.

http://www.rydexfunds.com -  Rydex Investments offers a lineup of ETFs that offer both long market exposure and inverse market performance.

http://www.spdrindex.com -  The Select Sector SPDRs are ETFs designed to follow the 9 key industry sectors within the S&P 500.

http://www.spdrs.com -  State Street Global Advisors manages a diverse line of ETFs that cover major stock and bond indexes along with specialized asset classes like gold (GLD).

http://www.vanguard.com/etf -  Vanguard ETFs follow broadly diversified stock and bond indexes. Fund investors that own conventional Vanguard index mutual funds may convert to Vanguard’s ETF share class for a small fee.

http://www.wisdomtree.com -  WisdomTree Investments offers ETFs that are fundamentally weighted according to dividends and earnings.

CFDs on Exchange Traded Funds (ETFs)

We offer a range of CFD over ETFs which allows you to have all the benefits of an ETF but with added gearing. Find out more about CFDs

Country P/E Ratios

taking a look at valuations, growth expectations, and stock market performance for more than 20 countries that have trackable ETFs.   Russia currently has the lowest P/E ratio at 6, followed by Italy (10) and France (11).  At 14, the US is more attractive based on its P/E ratio than most countries.  Taiwan has the highest P/E at 60, and the UK is surprisingly bad at 34.  It’s valuation is worse than China’s.  Germany also has a very high P/E ratio at 27.

Source: Bespoken Research

China – Secular bull in commodities remains intact

The Chinese Purchasing Managers Index (PMI) for May remained in the expansionary zone of higher than 50%, although it moderated to 53.1% from 53.5% in April, according to Li & Fung Research Centre. Although eight of the 11 sub-indices were slightly lower than their respective levels in the previous month, it is noteworthy that the new export orders index returned to the expansionary territory for the first time since June 2008. “Strong domestic demand, together with an improving export situation, has helped resume the expansion of the manufacturing sector in China, “said the report.

China’s PMI seems to indicate that the country might have seen the worst of the GDP growth statistics. (The Hong Kong PMI is used as a proxy of the Chinese PMI prior to 2004.)

Source: Plexus Asset Management (based on data from I-Net Bridge)

Importantly, China’s PMI for new export orders shows the Index again expanding (i.e. above the 50 level) and, based on the close relationship with the Metals Index, should provide further support for commodity prices.

Source: Plexus Asset Management (based on data from I-Net Bridge)

David Rosenberg, the closely followed chief economist and strategist of Gluskin Sheff, argues in a newsletter on Monday that the Asian economic revival, with strength spreading across the continent, may be for real. This is, needless to say, bullish for the commodity complex, with gold, copper and oil all having broken above their 200-day moving averages just as the US dollar has cracked below its key support level.

“The US is still the largest economy in the world by far, but it is losing its dominance each year and the fact of the matter is that it is a mature service-driven economy. Emerging Asia in general, and China in particular, are still the marginal buyer of basic materials, and their economic success is more critical to the outlook for commodities,” said Rosenberg.

He highlights that the world has just endured the steepest world economic setback in 70 years and yet commodity prices across a broad front – gold, oil, copper, soybeans -  managed to bottom at their highest “recession levels” of all time. “This attests to the supply discipline by today’s resource companies compared to their predecessors, and affirms our belief that what we experienced last year was a severe cyclical correction in what is still a secular bull market – you can connect the dots on the chart and see that the CRB looks a lot like what the S&P 500 looked like in the months following the sharp 1987 collapse,” said Rosenberg. It seemed like the end of the world in October of that year, and yet in retrospect it was just the fifth year in what proved to be an 18-year secular bull phase.

My research concurs with Rosenberg’s conclusion that commodities still seem to be in a supercycle that was only temporarily interrupted by the global economic malaise. As inflation money finds its way into commodities, it is still not too late to purchase these, but only on price corrections that are bound to occur from time to time.

Source:Prieur du Plessis

Emerging Markets ETF – EMM

One of my best trades for 2009 has been a long position in EEM, the emerging markets ETF. The chart of the week below shows that emerging markets have been consistently outperforming the S&P 500 index since the beginning or January (see ratio study at top of chart) and was one of the first major equity groups to top its 200 day simple moving average (dotted green line) in late April. While the SPX has been going sideways during May, emerging markets have continued to tack on gains, bolstered by rising prices for commodities.

I would not be surprised to see EEM finding increasing resistance at several stages in the 34-40 range, but for now at least, I see no reason to exit EEM at least until its performance relative to the SPX begins to falter.

Source:Bill Luby

Emerging Markets Continue to Surge in 2009

Russia’s RTS stock index was up another 3.2% today, while China was up 1.71% and India was up 2.3%.  The BRIC (Brazil, Russia, India, China) countries continue to surge higher in 2009, as they’ve far outpaced stock markets of so-called “developed’ countries.  Below we highlight their year to date performance compared to the S&P 500.  As shown, Russia is up a whopping 72.1% this year, followed by India at 51.6%, China at 44.6%, and Brazil at 39.7%.  The S&P 500 is up 0.22%.

Source: Bespoken Research

ETF, Up 100% – On Verge of Breakout

After getting absolutely crushed in 2008 and the first part of 2009, preferred stocks have made a nice comeback.  Below is a chart of the iShares S&P US Preferred Stock Index ETF (PFF).  Since bottoming in March, PFF is up 106.71% and is trying to break out from its January highs. 

Source: Bespoken Research

View: ishares ETFs on eBridge Trader

Past the worst?

The debate rages on regarding whether the global business cycle has started to stabilize, with most of the “green shoots” arguments based on softer data such as Purchasing Managers Indices (PMIs) appearing “less bad”. Although this is not the same as “good”, one should be aware of the fact that a bottoming process of the economic cycle has commenced. Importantly, different countries will experience dissimilar rates of recovery that, in turn, will impact asset allocation decisions.

An interesting analysis by the Goldman Sachs Global Economics team suggests that every major economy has possibly already seen its worst rate of GDP decline, either in Q4 of last year or Q1 of this year (see graphs below). “Emerging markets are likely to see a return to trend growth about six months, on average, before advanced economies. Similarly, emerging markets on average will close their output gaps – the difference between actual growth and trend growth – about two years before advanced economies,” said the economists.

Although the Goldman team are not under the elusion that they will be entirely correct on the timing of these events, they do feel more confident about the relative order in which countries/regions will reach the above milestones. The analysis leads them to the following market implications as summarized in the report:

• Equity markets have most likely bottomed and volatility should start diminishing.
• Countries that get back to trend growth sooner will tighten monetary policy sooner.
• Countries that get back to trend growth sooner should see their currencies strengthen.
• As the output gap will take many years to close, there should be limited pressure on prices and wages. Deflation will still be a greater concern in the short term than inflation.

• Emerging markets, particularly Asia, should offer more opportunities for outperformance for equities and forex, and could support commodity prices, especially industrial metals.

Source: Peter Berezin and Alex Kelston, Goldman Sachs – Global Economics

Recent Performance of Key ETFs

For those interested in a quick snapshot of how various ETFs across all asset classes have performed recently, below we highlight their 1-day, 5-day, and 1-month performance.  As far as equities go, there was lots of red today, but there’s still lots of green over the last month.

Source: Bespoken Research

Time for a New Strategy? ETFs are Becoming very popular.

IF the last 18 months have taught Americans anything, it’s that market collapses don’t discriminate. Even the most sophisticated and affluent investors lost big chunks of their fortunes. Access to the most exclusive hedge funds did not always limit the damage, as many participants had hoped it would.

As a result, a new mentality has emerged among some investors, who are rethinking the traditional approach to asset allocation. The upheaval in the markets and in the broader economy has led them to question long-honored principles of investing and to sound a death knell, at least for now, for the buy-and-hold mind-set.Moving away from the conventional mix of stocks, bonds and cash, many affluent investors and their advisers are turning to alternative investments – like managed futures and Exchange Traded Funds .

And some of the wealthiest investors are beginning to shed the bunker mentality, at least long enough to exploit shorter-term opportunities.

“In an environment of extraordinary uncertainty, the traditional role of asset allocation and long-term investing is far more difficult,” said Michael Sonnenfeldt, chief executive of Tiger 21, a forum for wealthy investors who meet monthly to discuss financial matters. “Many of our members believe we are in a trader’s market where long-term investing should be shunned but trading opportunities should be seized.”

Indeed, many investors are reluctant to place longer term bets and cling to larger cash allocations, anticipating continued volatility.

“The landscape going forward is extremely uncertain,” said Hans Olsen, chief investment officer at J.P. Morgan’s private wealth management unit. “There are many possible outcomes. You need to have a portfolio structured to reflect many possible futures. It comes down to the first principles of diversification.”

But how you define diversification is evolving.

“In a bull market, we don’t tend to care that our portfolio investments seem to behave the same, but I believe this bear market has uncovered a long-term problem,” said Jerry Verseput, a financial planner in El Dorado Hills, Calif., noting that technology and globalization have diluted the effectiveness of diversification based on company size and location. So he has embraced a new approach, using a portfolio of exchange-traded funds, or E.T.F.’s, that track different sectors of the economy, like energy and health care.

Below, several investment professionals describe how their philosophies have changed and how they are reallocating their portfolios. And one stalwart traditionalist explains why he thinks all of this is a lousy idea.
PASSIVE NO MORE

Cathy Pareto, a fee-only adviser in Coral Gables, Fla., came from the passive school of investing, where you invest your portfolio in a diversified basket of index funds. But in today’s world, she says, you can be too passive.

“Buy-and-hold was the mantra, but in light of recent events and a dramatically different world, those tenets may not always apply,” Ms. Pareto said.

She now dedicates 5 to 10 percent of her clients’ portfolios to more tactical moves. Currently, those include sector E.T.F.’s, like consumer staples, global materials and technology, as well as an E.T.F. that bets against real estate investment trusts. “That has been a radical change for me,” she said.

One thing she likes about E.T.F.’s is their trading flexibility. Unlike mutual funds, E.T.F.’s can be traded just like stocks.
A PASSION FOR CASH
Paul Speargas, a senior client adviser at WMS Partners, a family office and wealth advisory firm in Towson, Md., is looking in some unlikely spots for investments – notably those that do not move in line with the market.

His firm has purchased streams of cash – or discounted cash flows – from people who have been awarded large sums of money, like lottery winnings or court settlements, but receive them as annuities.

A TRADITIONALIST STANDS FIRM
Rick Ferri, founder of Portfolio Solutions, remains a die-hard buy-and-hold investor, scoffing at many notions that some other advisers now subscribe to.

Investors can achieve adequate diversification with a handful of index funds and E.T.F.’s, he said, though he is quick to acknowledge that the current market is a rough one. But it has not altered his view on asset allocation, and his investment philosophy remains intact: Don’t take more risk than you need to achieve your financial goals, and calibrate those needs with what your stomach can handle.

Source: Tara Siegel Bernard

Experience Exchange Traded Funds on eBridge

Year to Date Country Returns; US Lags

With global equity markets still in rally mode, below we highlight the year to date performance of the major indices for 83 countries around the world.  After nearly every country was down earlier in the year, 62 out of the 83 are now up in 2009.  Peru is up the most at 72.92%, while Costa Rica is down the most at -39.94%.  And the BRIC (Brazil, Russia, India, China) countries are significantly outperforming the developed G-7 countries.  Russia, India, and China rank 2nd, 3rd, and 4th in terms of year to date performance, and Brazil isn’t far behind in 10th place.  Canada has been the best performing G-7 country with a gain of 12.62% in 2009, but it ranks 35th out of 83.  The rest of the G-7 countries are bunched up in the 0%-5% range, which is closer to the bottom of the list than the top.  And the US is the worst of the seven with gains of less than 1%.  While the markets here in the states have rallied nicely off of their March lows, most other countries have bounced back even more 2009.

Source: Bespoken Research

India Has Biggest One-Day Change Ever – Trading ETFs

Get exposure to India’s Senex with ETFs,  Exchange Traded Funds.

India’s Sensex rallied 17.34% yesterday on unexpected election results for its biggest one-day gain ever in its 30 year history.  As shown in the bottom table below, the next biggest one-day gain came in March 1992 when the index rallied 13.14%.  From its peak in January 2008 to its recent low, the Sensex dropped 60.91%.  From its low, however, the index has now rallied 75.04% in just over two months.  Even after this 75% gain, India needs to rally another 46.13% to reach its old highs.

Source: Bespok Research

Q&A on emerging markets with Mark Mobius

I have been positive on emerging markets for a while, maintaining that especially China and other Asian countries, as well as resource-based Latin American countries, would we the leaders of the economic recovery and stock market performance in the next upswing. These views are supported by a recent Q&A with Mark Mobius, Templeton Asset Management’s emerging markets guru, as published in the company’s Market Views newsletter.

What’s your assessment of the global economy?

The global economy is in a situation where individuals, companies and economies are in a strong position to overcome the global crisis with support from their governments and central banks. We also believe that emerging markets will play a much greater role in the global economy. Countries such as China and India are expected to emerge as leaders due to their relatively stronger macroeconomic and financial positions.

In which regions are you most optimistic about investment opportunities?

Since it’s usually possible to find at least a few bargains in most markets, all emerging market regions are looking exciting. While global growth has slowed, emerging markets are still expected to grow at a much faster rate than developed markets. The accumulation of foreign exchange reserves also puts emerging economies in a much stronger position to weather external shocks with reserves, for example, in China, totaling nearly US$2 trillion. More importantly for us as value investors, the current valuations of emerging markets are attractive. Certain countries such as Turkey and Russia are now trading at single-digit price to earnings ratios.

Asia is the largest emerging market region in the world. Asian countries are also growing relatively fast. They include countries like China and India with very large populations whose per capita income is growing, and capital markets in those countries are undergoing rapid development. Economic growth remains relatively high, per capita incomes have been rising, valuations remain attractive and reforms continue, thus improving the region’s business and investment environment.

Valuations in Eastern European markets are also attractive, very attractive in some markets such as Hungary and Turkey which are trading at low single-digit P/Es. Poland is one of the few countries in the region that is expected to record positive GDP growth in 2009. Its valuations are, however, are not as attractive as some of its regional peers. Russia is another interesting market. With its huge land mass, large population and abundant natural resources, the country could become one of the fastest-developing economies in the longer-term.

Most Latin American economies are faring relatively well taking into account the current global macroeconomic conditions. There are selective countries which are more prone to the global downturn. For example, Mexico, but greater inter-regional trade has offset some of the adverse impact of lower export demand from the US. One of the region’s main attractions is its huge consumer market with pent-up demand for goods and services and world-class companies that are at the same time under-leveraged and inexpensive.

In addition, the region’s natural resources are among the largest in the world. Countries such as Chile and Peru which are among the world’s leading copper producers. Mexico is a net exporter of oil. Brazil is a major exporter of iron ore, and soft commodities such as soybeans and coffee as well. Colombia also exports commodities such as oil, coffee, coal, and so on. While commodity stocks have been negatively affected by the recent decline in commodity prices, many companies are still profitable at current price levels.

Also, frontier markets, which are the emerging markets of the future, are starting to look interesting. For example, the Middle East is of great interest and we believe the potential for economic growth and development remains considerable, especially if the current trend toward the implementation of political and economic reforms remains on course. Africa is another area we’re excited about. In addition to South Africa, regional economies are also beginning to look attractive.

In your opinion, what are the biggest threats to the global economy?

- loss of confidence
- excessive or poor regulation
- adoption of protectionist measures
- abandonment of the market economy philosophy

Why are you so positive about the outlook for emerging markets?

One key reason is the rapid growth of money supply, not only in the US but all over the world. Governments are trying their best to avoid deflation by pumping money into the economic system. This money must find a home and current savings interest rates, for example, for the US dollar, is not very warm and cozy. Investors have already begun to show renewed confidence and are seeking better returns. The obvious choice is equities. Specifically for emerging markets, we are optimistic because emerging markets:

- are undervalued, trading at extremely attractive valuations and have strong fundamentals
- have undervalued domestic currencies
- are expected to grow, in aggregate, faster than the developed countries
- will emerge as leaders due to their relatively stronger macroeconomic and financial positions.
- have strong holdings of foreign reserves, allowing them to better withstand any external shocks
- follow prudent fiscal policies
- have expanding trade and economic relations with each other; lowering their dependence on developed markets
- represent a huge consumer market as well as a large labor force
- have abundant natural reserves in countries such as Russia, Brazil and South Africa
- have strong potential for development in areas such as infrastructure

Source: Mark Mobius

Exchange Traded Fund Guide

ETFs have emerged as one of the fastest growing investment products in the world. Since first being launched in North America in 1989, ETFs have grown in popularity throughout North America, Europe, Asia and, more recently, Australia. In the US, ETFs are now amongst the most traded instruments, with ETF assets under management in the US expected to exceed US$2 trillion by 2011.

What are ETFs?

ETFs are funds that are tradable intraday on a regular stock exchange in the same way as a company stock. ETFs are passively managed investment funds which track an index or benchmark with the objective of replicating the performance of that index or benchmark.

Some ETFs are designed to follow specific stock, bond, commodity or currency indices. Most ETFs aim to replicate the index or benchmark 1:1, while others aim to replicate the inverse performance of the index. There are also ETFs which track the index or benchmark in a leveraged version, either long or short.

ETFs trade on an exchange like a stock but are structured like a traditional mutual fund. So you can apply stock trading strategies to ETFs-like placing a limit order or short selling. But at the same time, ETFs also offer many of the benefits of an index mutual fund including benchmark tracking, low expense ratios, and low turnover.

What are the benefits of ETFs?

Simple, easy diversification

ETFs provide investors with the ability to simply and cost-effectively establish a diversified portfolio through a single security with minimal time and effort. There are a broad range from Market Index, Commodities, Sectors/Industries, Real Estate, Fix Income and the massive growth area of Emerging Markets, Which were the driver of the last Bull Market and will be the major players of the next e.g. Brazil, Russia, India and China. 

Low cost

Since ETFs are typically able to achieve lower operating costs, the management fees are significantly lower than other managed funds and they are more cost-effective then holding the same exposure via individual shares. Brokerage or an adviser fee apply when buying or selling an ETF, just like shares. 

Returns from capital appreciation and income

An ETF will change in value as the underlying portfolio of assets changes and may provide income for investors through the dividends paid on the holdings in the fund. Investors may also enhance after tax returns from franking credits.

Fair value

ETFs are designed to ensure that they trade close to their underlying value. This provides the investor with certainty that the on-market price will reflect the value of the assets held in the fund.

Taxation advantages

Particularly with indexed-based ETFs, the turnover of the underlying portfolio is low, reducing the level of capital gains tax paid in the fund.

Liquidity and transparency

High or Low demand for an EFT is unlikely to affect its market price. If the demand for the fund rises, new basket of securities can be purchased. This process works in reverse if the demand should “fall”, securities in the fund would be sold off. Unlike unlisted managed funds, investors are able to enter and exit a fund during ASX trading hours and at a price quoted on ASX. Investors can also track the value of their investment on an intra-day basis.

Total Trader Chart – DBO Oil ETF

Difference ETFs are listed on the world’s major stock exchanges. EFTs, are only tradable during the open hours of the exchange that it is listed on. This does not restrict investors or traders from using ETFs, as you can place or amend any trade prior to the exchange opening through Tricom Trader, which will execute the order once the exchange opens.

EFTs can be trade as a Share or a CFD. Thus the CFD is quite popular as it provides leverage.

ETFs capture the best features of both managed funds and individual shares

Click to enlarge.

A world of Exchange Traded Funds now trading on the ASX

Click to enlarge. 

Oil Now Up 70% Since February

Don’t look now, but oil has been moving sharply higher over the last couple of weeks, and it is now up 71.15% over the last 3 months.  A move of this magnitude in any other market would normally be getting front-page headlines, sparking fears that energy prices would “break the back of the consumer.”  But since the consumer’s back is already supposedly broken, nobody seems to care — yet. 

But rest assured that a continued increase in prices at the pump will start to be felt at some point, causing another area of concern for both the people that consume it and the people in Washington hoping to decrease our use of it.  If oil prices are going higher on their own during such a tough economic time and Washington pols try to make them go up even more with cap and trade, taxes, etc., it’s not going to make their constituents too happy.  At least we know that Russia, Venezuela, the Middle East, and OPEC are starting to breathe a sigh of relief.  Things weren’t looking too good for them when oil was in the $30s.

Source: Bespoken Research

iShares ETFs on the ASX

A world of Exchange Traded Funds now trading on the ASX.

Fund Name

ASX Code

MEF

Total Net Assets* (A$) (000)  As at  01 May, 2009

Monthly Holdings As at  30 Apr, 2009

THE TRADING SCREEN FOR iShares® EXCHANGE TRADED FUNDS

Although iShares Exchange Traded Funds (ETFs) trade like shares on the ASX, there are key differences to consider when looking at the trading screen. With shares, it is reasonable to assume that the greater the market depth, the more liquid the stock. This, however, is not the case with iShares ETFs.

The fundamental concept, unique to iShares ETFs, when viewing the order book is:

The trading screen accurately represents the market price of an iShares ETF, not the larger volumes which are able to be bought or sold.

Below is a snapshot of a trading screen for iShares MSCI EAFE (ASX: IVE). On first glance, and by applying the same reasoning as you would when buying shares, the iShares ETF may appear thinly traded and therefore potentially difficult to sell. But, given this is an iShares ETF and by applying the correct reasoning, the screen tells a different story:

Click to Enlarge

Country ETFs Overbought

From our daily ETF Trends report at Bespoke Premium, below we highlight various country ETFs and their current trading levels.  An ETF becomes overbought when it trades more than one standard deviation above its 50-day moving average.  The % overbought number is how far the ETF is currently above this initial overbought level.  This is the first time in quite awhile that all country ETFs have been overbought at the same time, and it’s a sign that markets around the world are extended from their normal trading ranges.  The Taiwan ETF is the most overbought at 13.32%, followed by Italy (8.34%), India (7.92%), Brazil (7.14%), Sweden (7.08%), and South Korea (7.08%).  Japan is the least overbought at 1.4%.

Source: Bespoken Research

Country Market Performance Since the March 9th Low

The MSCI World index bottomed on March 9th just as the S&P 500 did.  Below is a table highlighting stock market performance for 83 countries around the world since March 9th and year to date.  As shown, Ukraine is up the most since March 9th with a gain of 67%.  Ukraine is followed by Puerto Rico, Romania, Peru, and Russia.  Even after rallying 52.7% since March 9th, Puerto Rico is still down 34% year to date.  Ten countries are actually down since March 9th, with Bermuda falling the most at 22%. 

Of the BRIC countries, Russia has done the best since March 9th, followed by India (34%), Brazil (24%), and then China (19.6%).  Italy has been the best performing G-7 country with a gain of 37.7%.  The US ranks second in the G-7, followed by Germany, Japan, and Canada.  The UK has been the worst performing G-7 country since March 9th with a gain of 14%. 

Year to date, Peru ranks first with a gain of 45.47%, followed by China, Pakistan, and Taiwan.  Bermuda, Costa Rica, and Nigeria are down the most year to date.

Source: Bespoken Research