Tag Archives: denmark

Norway ETFs In Focus Post Rate Cut

In its latest meeting, Norway’s central bank lowered its key interest rate to an all-time low of 0.5% from 0.75%. This move was highly anticipated given a history of rate cuts and weak outlook. The outlook for Western Europe’s biggest crude producer, Norway, has gone from bad to worse in the last couple of months, thanks to persistently low oil prices. Norway is among the top 10 nations famous for oil exports and, with its comparatively low population, oil forms a key part of the country’s GDP. The central bank stated that the developments in the Norwegian economy have been weaker than expected, with unemployment expected to go northward from the current level of 4.5%. Negative Interest Rate on Radar The Norwegian central bank also hinted at further rate cuts and warned that it could even go to negative territory in order to revive the economy. Meanwhile, several other countries are also following a strategy of monetary easing, which generally comes in the form of an interest rate cut to boost growth. Earlier this month, the European Central Bank (ECB) came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy. Apart from ECB, Norway’s neighbors Sweden and Denmark have also adopted this policy. Another European country – Switzerland – has lowest rates across the world and held the rates steady in March. Meanwhile, the Fed has also maintained its dovish stance. The central bank now expects the federal funds rate to rise to 0.875% by the end of the year, as compared with the previously expected 1.375%, implying only two rate hikes as compared to the previously expected four rate hikes. Although rate cuts are expected to boost economic activity, the Norwegian central bank noted that rock-bottom rates could hamper the profitability of commercial systems and affect the financial system adversely. A Closer Look at 2 Norwegian ETFs In the light of these developments, we highlight two ETFs – the Global X MSCI Norway ETF (NYSEARCA: NORW ) and the iShares MSCI Norway Capped Investable Market Index ETF (BATS: ENOR ) – that have gained 0.5% and 0.9%, respectively, in the last 5 days. Both have a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. NORW This is the most popular ETF tracking the Norwegian market with AUM of $59.4 million and average daily volume of almost 62,000 shares. The fund tracks the FTSE Norway 30 Index, holding 57 securities in its basket while charging 50 bps in annual fees from investors. The product is somewhat concentrated in both sectors and securities. The top three firms account for almost one third of total assets, while from a sector point of view energy dominates the fund’s assets with 30% share. The fund has a tilt toward large-cap stocks at 61%. ENOR This ETF follows the MSCI Norway IMI 25/50 Index, holding a basket of about 55 companies that are based or do most of their business in Norway. The product puts about 67.7% of total assets in the top 10 holdings, suggesting concentration. Although a capping methodology is applied, limiting the weight of any single stock to a maximum of 25% of total assets. Large caps are pretty prevalent, as these make up 61% of assets. With respect to sector holdings, energy again takes the largest share at 29.6%, followed by financials (20.1%) and consumer staples (15.3%). The product has amassed $17.9 million in its asset base while it trades in volumes of around 23,000 shares. It charges 53 bps in fees per year from investors. Original Post

Asset Class, Sector, And Country Returns For 2015

Every chart tells a story. Which story depends on what you choose to see. The asset class tables tell stories of best returns, worst returns, or a middle ground that avoids both. Maybe it’s the tale of mean reversion and infinite cycling of markets. Or randomness. Unpredictability. Irrationality. I’ve explained it before here , here , and here . This time, I’ll hold off till the end because most people will see what they want to see and ignore the rest. As usual, I’ll point out a few things I see in the tables, along with some other year-end data that was left out. Let’s get started. It was a lackluster year. For the most part, assets went nowhere in 2015. Emerging markets are the sole exception finishing the year with a double-digit loss. Emerging markets lost money four of the last five years, including losses three years in a row. A track record like that is a solid reason to dump an asset…or buy one. Depending on how you see things, emerging markets could be the best or worst investment going forward. Emerging markets lost money four of the last five years, including losses three years in a row. A track record like that is a solid reason to dump an asset…or buy one. Depending on how you see things, emerging markets could be the best or worst investment going forward. REITs are the best performer five of the last six years, the best annual returns over the last 15 years, and finished positive seven years in a row. Dividends drove a lot of that performance. REIT dividend yields are half of what they were in 2001. High-yield bonds were in the red for the first time in seven years. High-yield bonds were actually positive through June, though not by much. Then, the Fed raised rates for the first time in a decade. I’m sure many high-yield bond funds did worse. I’m certain many investors were caught by surprise. They wanted to boost their bond yield by 1-2% without realizing they were taking on more risk for the return. A diversified portfolio lost money for the first time since 2008, underperforming cash. The range of returns, from best to worst, was the smallest it’s been over the last 15 years. It’s hard to complain about a 1% loss when the best performer in the portfolio earned 2.8%. I guarantee many will complain anyway because it didn’t live up to the last few years. The S&P 500 is now positive for seven straight years, along with 12 of the last 15 years. That has only happened twice before – an eight-year stretch from ’82 to ’89 and a nine-year run from ’91 to ’99. Back in 2008, how many people predicted a positive S&P 500 for seven years straight? My guess – nobody. The S&P 500 sectors were split evenly last year with five winners and five losers. Those five winners haven’t seen a losing a year since 2008. Collectively, the sectors have performed great since the crisis. Every sector was positive in four out of the last seven years. It could have been five, if it wasn’t for the energy sector’s 2014 loss. Of course, energy was considered cheap at the end of 2014 (even I thought so). Then, it got cheaper in 2015. As a group, the developed markets aka MSCI EAFE basically broke even. For developed countries, Denmark actually had the best returns of 2015, at 24%, while Canada was the worst. Finland, Denmark, Belgium, and Switzerland each extended their gains to four years in a row while Ireland hit its fifth. If you were ranking developed countries based on highest CAPE ratio, the U.S. would be #4. Only Denmark (#1), Ireland (#2), and Japan (#3) are higher. As for consecutive losses, six developed countries – Germany, U.K., Spain, Australia, Sweden, and Norway – now have two losing years in a row (none have three). Of those six, Norway and Spain have the lowest CAPE ratio. As I said at the top, emerging markets have seen the worst of it the past few years. The table only tells half the story. Only two emerging market countries – Russia and Hungary – were positive for 2015, out of 23 in the MSCI EM index. And consecutive gains don’t exist. Hungary had the best year at 36%. Greece was the worst with a 61% loss, following a 40% loss in 2014. Buying a Greece ETF to start 2015 was an expensive lesson. Markets that fall far can still fall a lot further. Greece wasn’t alone. Four other countries – South Korea, Mexico, Malaysia, and Poland – have two losing years in a row. And four – Brazil, Chile, Colombia, and Czech Republic – sit with a three-year losing streak. With all that carnage, it’s no surprise that emerging markets have the lowest CAPE ratio and highest expected returns than any other asset class to start 2016. Remember If you shoot for the best performers every year, you risk ending up with the worst. While the worst performers, the hardest to buy into, can sometimes produce the best results…for those with patience and a high tolerance for pain. However, if you try to avoid the worst, you’ll likely miss out on the best, while ending up somewhere in the middle. And if you expect greatness every year, you’ll be disappointed often. Just look at 2015.

No Danger From COP21 For Airline And Shipping ETFs

The world is striving to arrest the rise in the global temperature to 2 degree Celsius by the end of this century. In that vein, global leaders assembled in Paris at the COP21 meet – which was the 21st annual conference of parties – to chalk out an elaborate and comprehensive plan to lower carbon emissions and moderate the warming of the planet. In any case, efforts to check global warming have been constant across countries. Not only developed economies, but the emerging ones too are pushing themselves to attain this goal. However, following two weeks of sharp diplomacy, 196 countries agreed upon a historic agreement on climate change last Saturday. Per the agreement, developed economies will provide a minimum of $100 billion to developing nations a year to finance the needed reforms they can’t pay for to restrain greenhouse gas emission. Needless to say, clean energy stocks and ETFs as well as fossil-fuel free investments will enjoy a huge benefit in the coming days. Is There Any Loophole in COP21 Treaty? Two key pollution causing sectors, international shipping and aviation were excluded from the COP21 treaty. International shipping emits 2.4% of global greenhouse gas emissions, almost the same that the whole of Germany does. Total aviation gives up about 2% of global GHGs, and international flights make up about 65% of that number, per the source . These emissions do not come under the territory of any specific country and thus is out of the COP21 treaty. In fact, greenhouse emissions are estimated to rise exponentially by 2050. However, International Civil Aviation Organization (ICAO) has indicated to that it will plan a global market-based measure to lower carbon emissions. The agency has vowed to perk up fuel efficiency by 1.5% each year until 2020 and ‘to halve 2005-level emissions by 2050’, per citylab.com. International Maritime Organization also “has set an energy efficiency requirement for ships built in 2025, but not an overall carbon emissions target.” Needless to say, technological advancements are being tested rigorously in the aviation and shipping industry for decarbonization, but it has a long way to go. As of now, these two sectors are not as vulnerable as the fossil-fuel related sectors from Paris climate summit. Investors can safely play or dump airline and shipping stocks and ETFs on their inherent sector strength or weakness. Below we highlight two sector ETFs in detail. Airline – U.S. Global Jets ETF (NYSEARCA: JETS ) This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 34 securities with double-digit allocation going to Southwest Airlines, Delta Air Lines, American Airlines and United Continental. Other firms hold less than 4.44% share. The ETF has a certain tilt toward large-cap stocks at 62% while small and mid caps account for 24% and 14% share, respectively, in the basket. The fund has gathered $48.4 million in its asset base while sees moderate trading volume of nearly 40,000 shares a day. It charges investors 60 bps in annual fees. The fund added 13.2% in the last six months (as of December 15, 2015). Guggenheim Shipping ETF (NYSEARCA: SEA ) The $30.2 million fund tracks the Dow Jones Global Shipping Index and holds 26 securities in its basket. The index reflects high dividend-paying companies in the global shipping industry. As far as the sector breakdown goes, the fund is concentrated on the industrial sector with about 58.8% exposure while the rest is attributed to the energy sector. In terms of geographic distribution, the U.S. takes the top spot with more than 36% of focus, followed by Denmark (19.1%), Japan (13.5%) and Greece (9.5%). The product charges 65 bps in annual fees for this diversified exposure. However, the fund was off about 31% in the last six months (as of December 15, 2015). Original Post