Scalper1 News
Commodities across the board, ranging from natural resources to metals, are trapped in a vicious trading circle this year and see no sign of respite. This is especially true, as the Bloomberg Commodity Index has plunged nearly 13% in the year-to-date time frame. This is especially true in the backdrop of a strong dollar, global growth concerns, global supply glut and waning demand that have dampened the appeal for the commodities. Notably, a rising U.S. currency makes dollar-denominated assets more expensive for foreign investors. In particular, a persistent slowdown in the world’s largest buyer of raw materials – China – and the turmoil in the Chinese stocks have been the major culprits. To add to the woes, the latest disappointing trade data and China’s surprise move to devalue its currency, the yuan, has raised concerns over the health of the world’s second-largest economy. This suggests that demand for basic industrial commodity inputs will remain weak. Sluggish growth in the Eurozone and a possible U.S. interest rates hike are also taking a toll on the commodities market with an extreme bearish outlook on a number of commodities like natural gas, oil, coffee, sugar, wheat, corn, platinum, nickel, gold, aluminum, silver and copper. While low commodity prices are threatening a number of commodity producers and key producing countries, they are a boon to the raw material intensive nations. This is because persistent weakness in commodities has made raw materials extremely cheap for the countries that import them. It will lead to expansion in balance of payments, increase output and reduce inflation in these countries, thereby leading to a surge in overall economic growth. As a result, commodities importing countries are expected to outperform as long as the commodities slump. In fact, some nations have seen this phenomenon take place while many are yet to see the positive impact of lower prices due to their slumping currencies. With the advent of ETFs, these nations are easier to play than ever. In light of this, we have highlighted four country ETFs that could enjoy smooth trading in the months ahead should commodity prices remain weak or fall further. Investors should note that these funds have a favorable Zacks ETF Rank of 2 (Buy) or 3 (Hold). iShares MSCI India ETF (BATS: INDA ) Falling commodity prices would benefit India, which is a net commodity importer, and provide a boost to national income. While crude oil accounts for one-third of the total imports, industrial metals, coal and precious metals also make up for a large part of imports. Given this, Indian ETFs could see smooth trading in the coming months and INDA could be one of the intriguing picks to play the surge. It follows the MSCI India Total Return Index and charges 68 bps in fees per year from investors. Holding 71 stocks in its basket, the fund is highly concentrated on the top two firms – Infosys (NYSE: INFY ) and Housing Development Finance Corp. (NYSE: HDB ) – that together make up for 20% of total assets. Other firms hold no more than 6.29% share. Further, the product is slightly tilted towards the information technology sector at 21.5% while financials, consumer staples, healthcare and energy round off the top five. The ETF has amassed over $3.9 billion and trades in volume of nearly 2 million shares a day. INDA is up 2.5% in the year-to-date time frame and has a Zacks ETF Rank of 2. iShares MSCI Italy Capped ETF (NYSEARCA: EWI ) Italy imports about 17% of oil, and 10% of minerals and non-ferrous metals. In addition, it also imports food products and beverages from its trading partners. The best way to invest in Italy is through EWI, a product that has nearly $1.1 billion in assets. The fund tracks the MSCI Italy 25-50 index, holding 26 stocks in its basket. It is heavily concentrated on the top two firms, Intesa Sanpaolo ( OTCPK:ISNPY ) and Eni (NYSE: E ), with a combined 23% share while other securities hold less than 8% of total assets. Further, about 42% of the fund’s portfolio is allotted to financials from a sector look while utilities, energy, industrials and consumer discretionary round off the top five with double-digit exposure each. The fund trades in heavy volume of more than 2.2 million shares a day on average and charges 48 bps in annual fees. It has returned about 17.1% so far this year and has a Zacks ETF Rank of 2. iShares MSCI Netherlands ETF (NYSEARCA: EWN ) The Netherlands is also a big net importer of oil, which accounts for 29% of total imports. Iron, steel and aluminum also make up for nearly 5% of imports. The most popular way to target the Dutch economy is with EWN, which tracks the MSCI Netherlands Investable Market Index. In total, the fund holds 50 stocks in its basket with the largest allocation to the top two firms – Unilever (NYSE: UN ) and ING Groep (NYSE: ING ) – that together make up for 33.7% of assets. Other firms hold no more than 8.55% share. Consumer staples and financials actually take the top two spots in the basket with 30% and 22.7% share, respectively, while industrial and information technology also account for double-digit exposure each. The product is rich as it has accumulated over $208.7 million in AUM and sees average daily volume of nearly 2.3 million shares. Expense ratio came in at 0.48%. The fund has gained 10.7% so far this year and has a Zacks ETF Rank of 2. iShares MSCI South Korea Capped ETF (NYSEARCA: EWY ) Last but not the least, South Korea is the major beneficiary of lower commodity prices, which in turn would boost investments and consumption. While oil forms a hefty 23% of total imports, natural gas, coal, steel and iron ore also account for a decent part of imports. Investors could focus on this economy (Asia’s fourth largest) through the proxy $3.6-billion EWY, which is the most popular and liquid option to track the country’s equity space. The ETF follows the MSCI Korea 25/50 index, holding 109 stocks in its basket. Samsung ( OTC:SSNLF ) dominates the fund’s return at nearly 20% while other firms hold less than 3.7% of assets. From a sector look, information technology accounts for nearly one-third share while consumer discretionary, financials and industrials round off the next three spots with double-digit allocation each. The fund trades in average daily volume of 2.5 million shares and charges 62 bps in annual fees. It has lost 13.3% in the year-to-date time frame, as a decline in the South Korean currency more than offset the lower commodity prices. EWY has a Zacks ETF Rank of 3. Original Post Scalper1 News
Scalper1 News