Tag Archives: api

Pakistan: The Growth Story Continues

In this article, I will apprise investors about the recent developments in Pakistan having a material impact on the price on the Pakistan ETF (NYSEARCA: PAK ). I recommend readers to read this article in tandem with my previous articles: Pakistan: An Undiscovered Land of Opportunities and Pakistan: Impending Growth Story. Pakistan is an oil importing country that is immensely benefiting from the recent plunge in oil prices. It has been a blessing for its economy in the following ways: CPI (Consumer price index), which is being calculated monthly by Pakistan Bureau of Statistics , has been on the downward trajectory, increasing the purchasing power of ordinary Pakistanis. In addition to that, in line with the decline in inflation number (which is one of the primary indicator SBP considers), State Bank of Pakistan (SBP) slashed the interest rate to a historical low of 6.5%. However, due to lower base effect the CPI numbers have started going up but within the range of moderate inflation. I believe interest rates would remain constant in the upcoming MPS (Monetary Policy Statement). Nonetheless, I foresee 50bps increase in the fourth quarter of the current year. Click to enlarge Prices of petroleum products in Pakistan have not gone down in sync with international crude oil price. This is because the oil and gas sector is heavily regulated by the government of Pakistan, which has levied high indirect tax in order to increase its indirect sources of revenue, bridging a gap of fiscal deficit. Narrowing fiscal deficit is one of the prime conditions of IMF as Pakistan is in IMF program since 2008 due to its incessant and growing current account deficits. Now the situation has improved as Pakistan’s current account deficit has narrowed by 23% , with shrinking fiscal deficit cloaking in at 1.7% of GDP as compared to 2.4% in the same period last year signaling improvement in the chronic structural problem of Pakistan’s economy. Other developments include: a) Approval of the much-awaited five-year Auto policy . This policy would bode well primarily due to phased reduction in duties by 5%-2% for existing players in the market coupled with tax incentives for new investments by existing and new brands in the market. Automobile companies constitute ~3.2% of the PAK ETF. b) Cement sector is rallying with bullish sentiments propelled by strong local demand and margin accretion due to increased construction activity and lower input prices respectively. Moreover, although the FIPI (Foreign Indirect portfolio investment) is negative year to date but cements are attracting foreign indirect portfolio investments with a positive contribution of USD 18.3 mn month to date. Cement companies constitute 14% of the PAK ETF. The following graph depicts sector-wise foreign portfolio investment of the month of February 2016. c) Recent rally in oil prices has reinvigorated the interests of investors in the Oil and Gas sector; this week oil and gas index outperformed the benchmark index. In recent weeks, the OGTI index surged by 2.5% against 1.26% increase in KSE-100. In conclusion, I would again reiterate that PAK is an investment opportunity that is high risk and high return but better for the diversification of your portfolio along with other regional ETFs. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

VIX: A Hedge To Consider For Your Portfolio

It is not uncommon to see the markets follow irrational trends. Sometimes, the markets will climb up or drop down on information that may indicate contrary trends. This past month I’ve been watching the markets with immense caution; I was a little surprised that we have seen US stocks rise for a fifth straight week. For the long run, I have a handful of stocks I think will grow exceptionally, but for the most part I believe we are entering a bear market, and I have thus prepared myself with hedges. The headlines, and the data and statistics that are coming in from Central banks and governments across the world are not exactly signaling optimism for the markets, yet the markets are trending towards all-time highs. ^SPX data by YCharts I think it’s absurd that the S&P 500 is approaching all-time highs, especially at a time like this. I will not go in depth as to why I think we are due for a major correction (again), but I will simply write a basic summary about why we are likely going to continue falling into a bear market, and about why investing in the VIX index might be smart. The reasons for a bear market heavily outweigh the reasons for a bull market right now. Commodities have staged an odd recovery the past couple of weeks that hasn’t exactly made much sense. Most importantly right now is the prices of oil; oil has proved to be latched on to the movement of stocks and vice versa. Brent Crude Oil Spot Price data by YCharts Brent crude oil has spiked over $10 USD in less than a couple months, but why? The world oil supply has remained at roughly 98 mb/d the past couple of months and demand has also been idle. I firmly believe oil will stage a recovery, but this recovery seems fake and is happening way too fast, which is alarming. In addition to the suspicious rise in commodity prices, there is tons of debt everywhere. People are getting crushed by margin calls, people are still accumulating debt, and energy companies are on the brink of bankruptcies. Banks are also having a hard time. Many major banks are hitting 52-week lows, although they have recovered slightly; but that point aside, they are still going to have to deal with lower interest rates. Nations around the world are following a general trend of lowering interest rates, even into the negative and this will likely hurt major bank stocks. Banks have also proven to be central to market crashes in recent history. It was a little surprising to see the markets react so positively to the Fed’s latest press release. Yellen gave the people a lot of “ifs” and “buts” and “maybes”, and I feel it did not justify the market spike we have just seen. On top of all this, we are seeing a ton of political turmoil, which inevitably affects the markets. There are a lot of problems right now in the world: Brazil is on the brink of a political and economic collapse, Europe is dealing with the refugee crisis which in turn is giving right wing groups serious power and support, Brexit is a serious possibility and would have potential consequences on markets worldwide (and in my personal opinion the Brexit would negatively impact the world markets), and then there’s the Middle East tension. I don’t want this article to be a sensationalist piece, but there are a lot of similarities between what is going on right now and the 1930s. Basically, I believe we are in for a roller coaster ride, and if there are people out there who are long on the markets as a whole, maybe a hedge or two would greatly benefit your portfolio. The VIX index The VIX is an index that uses options to predict stock market volatility, and it is commonly referred to as the fear gauge. ^VIX data by YCharts As you can see from the chart we have had numerous spikes in a short span of time. The last time we’ve seen this type of market volatility was in 2011, and I believe this time there is potential for the volatility to be even greater. Depending what market one invests in, it is entirely possible to put some money in an index that tracks the movement of the VIX. When the time comes for the market to crash, one’s portfolio will be protected with a hedge in the VIX, but this is definitely a highly risky trade. For example, Canadians, or those who invest in the TSX can invest in HVU. As I write this article the VIX is approaching lows it hasn’t seen since early 2015, but I believe the market volatility has just begun. Catching the bottom of the VIX and riding it up during a major spike could be very profitable, but once again this is to be used as a swing trade, and the ETF should not be held for more than a couple of weeks at most. Generally, I want readers to tread with caution in this current market environment. Everything seems off, and the markets are being irrational at the moment, thus a crash or a longer bear market might be in store for us. Hedging your portfolio is important, and remember to do your own research. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

FVC: First Trust To Roll Out Dynamic Focus Five ETF

By Jonathan Jones and Tom Lydon First Trust, the seventh-largest U.S. ETF issuer, is planning to introduce a dynamic version of its popular First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) . The First Trust Dorsey Wright Dynamic Focus 5 ETF (NASDAQ: FVC ) is expected to debut today, reports ETF Trends . The new ETF will track the Dorsey Wright Dynamic Focus Five Index. “The index is designed to provide targeted exposure to five First Trust sector and industry based ETFs as identified by DWA’s proprietary relative strength methodology. This methodology is a ranking system used to measure a security’s price momentum relative to its peers and helps DWA identify meaningful patterns in daily share price movements,” according to a statement issued by First Trust . FV, one of the most successful ETFs to come to market in 2014, follows DWA’s relative strength ranking system where sector ETFs are compared to each other to measure price momentum relative to other ETFs in the universe and the top five ranking ETFs are included in the underlying index. The momentum strategy basically bets that hot movers will continue to rise, so investors would essentially be buying high and selling even higher. FVC’s underlying index “allocates to the cash index when the relative strength of more than one-third of the universe of First Trust ETFs begins to diminish relative to the cash index.” “The index seeks to identify major themes in the market, have exposure to those sectors whose price action is superior to others in the universe, and eliminate exposure to those sectors whose price action is sub-par to others in the universe. In instances where relative strength diminishes across equity sectors, the index gains varying amounts of exposure to the cash index,” according to the statement. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.