Tag Archives: china

3 Small-Cap Growth ETFs To Beat Global Worries

Concerns regarding sluggish global growth have curbed the major benchmarks in recent times. Dismal manufacturing data out of China once again sent jitters in the global markets on Tuesday. Disappointing factory data in the Eurozone further dampened investor sentiment. On the other hand, recently released economic data showed that the U.S. economy has recovered significantly from the sluggish growth conditions in the first quarter. While others are struggling to stem the rout, the U.S. economy seems to be standing tall amid falling towers. In this situation, ETFs that have significant exposure to companies with a more domestic focus are likely to gain from improving fundamentals. China, Europe Suffering China The China Federation of Logistics and Purchasing reported on Tuesday that the official manufacturing PMI index declined to a three-year low in August to 49.7 from July’s reading of 50. Meanwhile, the final Caixin Manufacturing Purchasing Managers’ index fell from 47.8 in July to 47.3 in August, reaching its lowest level in the last 77 months. The reading below 50 signaled that manufacturing activity contracted in August. Moreover, a plunge of 8.3% in export and a decline of 8.1% in import in July indicated the world’s second biggest economy is suffering from both weak global and domestic demand. It was also reported that producer prices declined to the lowest level in six years in July. These disappointing data raised concerns that China may fail to achieve the target of 7% GDP growth rate this year. Europe Investors are also worried about the economic condition of Europe. The final reading of Markit’s manufacturing PMI came in at 52.3 in August, below July’s reading of 52.4. Though the reading of the index reached a 16-month high in Germany, the reading out of France and Italy declined to the lowest level in last four months. Meanwhile, the Markit/Cips UK manufacturing PMI declined from 51.9 in July to 51.5 in August, indicating a slowdown in manufacturing activity in the U.K. Meanwhile, it was also reported that the Eurozone’s inflation rate was at only 0.2% in August, significantly below the targeted rate of 2%. Last month, Eurostat reported that the common currency bloc expanded at a rate of only 0.3% in the second quarter, down from the first quarter’s growth rate of 0.4%. While the French economy remained stagnant in the second quarter following a 0.7% rise in the first, growth of only 0.2% in Italy came in below the first quarter’s growth rate of 0.3%. U.S. Outperforming Despite global growth coming to a grinding halt, the “second estimate” released by the U.S. Department of Commerce last month showed that the GDP in the second quarter advanced at a pace of 3.7%, significantly higher than the first quarter’s rise of only 0.6%. The report also showed that gross domestic purchases surged at a rate of 3.4% during the quarter compared to a gain of 2.5% in the first, indicating an increase in domestic demand. Also, the personal consumption expenditure (PCE) price index gained 1.5% during the quarter, a turnaround from the first quarter’s 1.9% decline. Meanwhile, job data released last month showed that labor market condition in the U.S. remained strong in July. While the U.S. economy created a total of 215,000 jobs in July, the unemployment rate remained unchanged from June’s seven-year low of 5.3%. Separately, the Commerce Department reported on Tuesday that construction spending gained 0.7% to a seasonally adjusted annual rate of $1.08 trillion, hitting its highest tally since May 2008. 3 ETFs to Buy Small-cap ETFs that are expected to have limited international exposure are believed to remain untouched by global growth concerns. Meanwhile, these domestically-focused ETFs are poised to benefit from the favorable economic environment in the U.S. Hence, we have highlighted three well-ranked small-cap growth ETFs that investors may find profitable in the current situation. PowerShares Russell 2000 Pure Growth ETF (NYSEARCA: PXSG ) This fund provides exposure across 310 securities by tracking the Russell 2000 Pure Growth Index. It is well diversified across its holdings with none of the companies accounting for more than 1.4% of total assets. Sector-wise, health care takes the top spot at 31.5%, while information technology and consumer discretionary take the next two positions. PXSG has amassed $31.3 million in its asset base while it sees light volume of around 2,947 shares a day. The ETF has 0.41% in expense ratio and has a Zacks ETF Rank #2 (Strong Buy) with a Medium risk outlook. The ETF returned 1.5% over the past one week. SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) This fund follows the S&P SmallCap 600 Growth Index, holding 355 stocks in its portfolio. It is also well diversified across its holdings with none of the companies accounting for more than 1.3% of total assets. The ETF has been able to manage $544.2 million in its asset base and has a low traded volume of 20,249 shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook and charges 15 bps in annual fees and expenses. The product returned 1.4% over the past one week. Vanguard Small Cap Growth ETF (NYSEARCA: VBK ) This ETF provides exposure to 738 firms by tracking the CRSP US Small Cap Growth Index. The fund has amassed $4.47 billion in its asset base while it sees a moderate volume of around 188,000 shares a day. Only 5.4% of the fund’s assets were invested in the top 10 holdings. About 20.6% of its assets are allocated to the financial sector, which takes the top spot among other sectors. The ETF charges a fee of only 9 bps annually and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. It returned 0.3% in the past one week. Original Post

5 Worst Performing Mutual Funds In August

It turned out to be quite a terrible August for US mutual funds. Except for the Precious Metals equity funds, none of the sector equity mutual funds finished in the green in August. Moreover, the Healthcare sector which had been a consistently strong performer since last year turned out to be the biggest loser among sector equity funds in August. Real Estate sector, which was July’s best gainer, suffered a 5.7% decline in August. The best gainer for August turned out to be Bear Market funds, gaining a robust 9.1%. This is particularly significant given the fact that the second and third placed Commodities Precious Metals and Equity Precious Metals had scored gains of 3.3% and 2.7%. Municipal Bond Funds were the only other gainers, but those gains were marginal with the best one being 0.3%. The success of Bear Market funds is not surprising though. It was a torrid August for markets, struggling hard to survive growth fears in China. For the month, the benchmarks dropped to their multi-month lows. The world’s second largest economy continued to be a cause for concern and led to a global market rout. A slump in oil prices also weighed on energy stocks before a rebound in prices late in the month. August’s Performance For the month, the S&P 500, the Dow and the Nasdaq plunged 6.3%, 6.6% and 6.9%, respectively. While the Dow notched up its biggest monthly decline in more than five years, the S&P 500 and the Nasdaq registered their steepest monthly losses since May 2012. All the major indexes moved in and out of their correction territory to end a volatile month in the red. Benchmarks slumped for the month on concerns that a weak Chinese economy would result in a global slowdown. Benchmarks also closed in the red, following the yuan’s devaluation. Uncertainty about the timing of a Fed rate hike was another major cause for the losses. China Fears Spook Markets Several economic indicators from China signaled the slowdown may be deepening. Data on manufacturing was disappointing in nature, indicating underlying China’s economic weakness. Producer prices declined to the lowest level in six years in July. Additionally, exports recorded a greater than expected decline. Dismal data aggravated losses for China stocks, which weighed on investor sentiment in the U.S. On Aug. 21, the blue-chip index nosedived, declining 3.6% after a volatile trading session. This was a result of investors’ concerns about the adverse effects of a slowdown in China’s economy. The Shanghai Composite Index tanked 8.5% to close at 3,209.91 on the same day. China’s main stock index moved into the red for the year, while it plunged almost 38% from its peak in mid-June. In its latest move to prop up markets and the economy, the People’s Bank of China (PBOC) decided to cut interest rates for the fifth time since November. The apex bank will cut one-year lending rate to 4.6% from 4.85%, while the one-year deposit rate will be lowered to 1.75% from 2%. The PBOC also decided to reduce reserve requirement ratio for all banks from 18.5% to 18%. This will pump around 678 billion yuan or about $105.9 billion into the Chinese economy. However, investors remained unconvinced about whether these measures would be able to prop up the economy. Market Rout & Rebound China’s concerns had triggered record losses for U.S. stocks as well as all other major markets across the world at the latter half of August. The S&P 500 and the Dow had entered correction territories. A drop of 10% or higher than the peak achieved that year, generally indicates a correction. The blue-chip index and the S&P 500 posted their biggest weekly declines for the week ending Aug. 21 since Sep. 2011. The Nasdaq recorded its steepest weekly drop since Aug. 2011. Losses spilled over into the following Monday, i.e. Aug. 24, with the Dow plunging by more than 1,000 points during the first six minutes of trading. The index finished in negative territory, losing 3.6% and settled at its lowest level since Feb. 2014. All 30 Dow components ended in the red. Meanwhile, the S&P 500 dropped more than 10% on Aug. 24 from its peak achieved on May 21, losing 3.9%. Moreover, the index ended at its lowest level on Monday since Oct. 2014. Almost all the 500 members of the index settled in negative territory. The S&P 500 along with the blue-chip index posted their biggest one-day percentage declines on Aug. 24 since Aug. 2011. Additionally, the Nasdaq declined heavily, by 3.8%. However, markets rebounded later on Aug. 27 and 28. On Aug. 27, the Dow and the S&P 500 registered their biggest one-day percentage gain since Nov. 2011. The Dow also posted its third largest gain in terms of points and the best since the crisis of 2008. The Nasdaq too notched up its biggest one-day gain since Aug. 2011. The indexes bounced back on Aug. 27 following a six-day rout, which wiped out around $2 trillion from the market. Upbeat GDP data and rebound in oil prices helped benchmarks notch up massive gains for the second consecutive day on Aug. 28. The blue-chip index increased 6.3% over two days, its largest two-day increase since 2008. Why Bear Market Funds Won? The gains, or the rebound, after the market rout failed to help benchmarks finish in the green for the month. Oil prices had shown a reversal in fortunes at the end of August, but those gains were insufficient compared to the month-long decline oil prices suffered. During August, price of WTI crude oil had finished below $39 a barrel for the first time since Feb. 2009. Additionally, price of Brent crude oil fell below the $43 mark for the first time since March 2009. Moreover, certain dismal earnings numbers and rate hike uncertainty also kept the benchmarks in the red. The losses for the broader markets helped funds that employ a short strategy. The Long/Short mutual funds generally profit from both bull and bear markets. These funds utilize conventional methods to identify stocks which are either under or overvalued, aiming to profit from shorting the overvalued stocks. These funds invest in short positions and profit from declines in share prices. The returns thus move in the opposite direction of the markets. These funds use leverage, derivatives, and short positions in order to maximize total returns, irrespective of market conditions. Biggest Losers in August As mentioned earlier, there was hardly any category of funds outperforming. The monthly performance list is all about decliners this time. Below we present 10 fund categories with the biggest losses in August: Source: Morningstar To have China Region as the biggest loser among all categories was no surprise. The rout in Chinese markets was sure to keep the funds under pressure. Pacific Asia, Diversified Emerging Markets and India also had to deal with China concerns and ended in the red. The emerging markets are also having to put up with recent market turmoil and wild currency swings. Now let’s look at funds that had suffered largest declines in August. We have narrowed our search based on Zacks Mutual Fund Rank. The following funds carry either a Zacks Mutual Fund Rank #4 (Sell) or Zacks Mutual Fund Rank #5 (Strong Sell) as we expect the funds to underperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. The minimum initial investment for these funds is within $5000. Turner Small Cap Growth (MUTF: TSCEX ) invests a minimum of 80% of its assets in small-cap US firms’ equity securities. These firms are believed to have strong earnings growth prospects. The firms are diversified across economic sectors but sector concentration may be on ones that approximate those in the 2000 Growth Index. TSCEX currently carries a Zacks Mutual Fund Rank #4 and lost 9.6% in August. Alger Health Sciences A (MUTF: AHSAX ) seeks capital growth over the long term. AHSAX invests most of its assets in equity securities of companies related to the health sciences sector. These companies may be of any size. AHSAX may also invest in derivative instruments. AHSAX currently carries a Zacks Mutual Fund Rank #5 and lost 8.9% in August. AllianzGI Health Sciences A (MUTF: RAGHX ) invests a lion’s share of its assets in health-science related companies including those that design, manufacture or sell products associated with healthcare, medicine or life sciences. It invests mostly in common stocks and other equity securities. RAGHX currently carries a Zacks Mutual Fund Rank #4 and lost 7.6% in August. BlackRock Health Sciences Opportunities Portfolio Investor A (MUTF: SHSAX ) seeks capital appreciation over the long run. It invests a major portion of its assets in healthcare and related companies. These firms include health care equipment and suppliers, health care providers and services, biotechnology companies and also pharmaceuticals. SHSAX currently carries a Zacks Mutual Fund Rank #4 and lost 7.5% in August. Gabelli Utilities A (MUTF: GAUAX ) seeks to provide high return through current income and capital growth. The fund invests a large portion of its assets in readily marketable US and non-US utility companies that pay dividends. These companies are believed to have the potential to offer current income or capital growth. GAUAX currently carries a Zacks Mutual Fund Rank #4 and lost 5.1% in August. Original Post

Gold Climbs Today, Is There Opportunity In Gold ETFs?

The SPDR Gold Trust ETF (NYSEARCA: GLD ) might follow the age-long market adage of climbing the wall of worry and sliding the slope of hope as fears about a September rate hike rise and fall. The Wall Street Journal reports that gold prices opened higher in European trade today as fears about when the U.S. Federal Reserve is likely to raise interest rates. The WSJ reports that Spot gold prices were up 0.7% at $1,142.11 a troy ounce on the London Spot Market this morning. In fact, the yellow metal has hit a four-day high earlier in the session at $1,144.28 an ounce. Today’s gains continue the positive trend that has had gold climbing towards the symbolic resistance level of $1,150. The yellow metal is starting to look attractive again after the investors hand traders have exhausted themselves in trying to time the market in relation to a September rate hike. Yesterday, spot gold climned 0.04% to $1,134 an ounce in U.S. markets despite views by Fed vice president Fischer that a September rate hike is probable because it makes sense. Analysts see uptrend in sight for GLD Analysts are optimistic about the prospects of the bullion and GLD going forward as the market enters September. The market seems to think raising of interest rates this month would be a decisive action that will lead gold to a bottom and remove much of the volatility. In contrast, if the Fed doesn’t raise rates this month, the market will be at peace at least until talks about a rate hike begins again in December. Analysts at UBS say: Gold has been closely tracking changes in Fed policy expectations of late and we expect this influence on price action to continue up ahead… The link is likely going to become more acute in the next two weeks as the September FOMC [Federal Open Market Committee] meeting draws near. Analysts at Barclays are also positive about the prospects of gold. They said, “Further support from U.S. rate expectations should… be limited, as the market is already pricing in a low probability of a September hike. Howie Lee, an investment analyst at Phillip Futures believes that the market should see less volatility in gold prices going forward. In his words, “We still stand by our view that gold is likely to trade above $1,100 in the near-term and that the momentum right now is for gold to rally more than to fall.” Is there an opportunity in gold ETFs? Gold and GLD seems to be on track to have a pleasant run this week as the precious metal continues to trade above a more than five-year closing low of $1,084 that was reached on August 5 the China’s economy took a hit . Saxo Bank, in a research note that was released yesterday observed that last week’s short positions in the bullion were cut by 22% in contrast to a four-fold increase of 845,000 in long ounces. Link to the original article on Learn Bonds