Tag Archives: etf

Brazil Stocks, ETFs Ignore Slump: Rally On Rousseff Issues

Recession is not new to the Brazilian economy as for the last three quarters the economy has not shown any growth. The Brazilian economy contracted 1.7% in the third quarter of this year, preceded by 2.1% GDP decline in Q2 and 0.7% contraction in Q1. The persistent decline flared up the country’s worst recession in 25 years . Year over year, GDP is off 4.5%. In the first nine months of 2015, the Brazilian economy shortened 3.2%, the largest decline ever, per trading economics . Investment declined for the ninth successive quarter and household spending dropped for the third straight quarter, making the recession acute. A persistent slump in commodity prices has badly hit the commodity-rich Brazilian economy. If this was not enough, China – one of the key trading partners of Brazil – is suffering from a prolonged manufacturing slowdown leading to further woes in Brazilian exports. This once-growing emerging nation – a pillar of the BRIC bloc – has been buckling under dual pressure of slower growth and heightened inflation for long. Inflation in Brazil reached a 12-year high in October and hovered around the 10% level – way above the central bank’s target of 6.5%. The Brazilian currency is down over 30% against the greenback so far this year and is likely to head toward decline once the Fed shoots the lift-off this month. The budget deficit widened the most in at least two decade. Joblessness soared to 8.9% in Brazil during Q3, up from 6.8% a year ago. This left consumers cash-parched and the household spending was down 4.5% in the quarter. Political corruption is also rampant in Brazil. The key interest rate at Brazil is at a nine-year high of 14.25%. In addition, a stagflation-like situation (where measures adopted to tame inflation will halt growth and vice versa) is prohibiting the central bank to hike the rate further to contain inflation. All in all, things are so chaotic, both at home and outside, that any easy way out of this vicious cycle of recession appears impossible. Is There Any Hope for the Market? Quite expectedly, the outrageous economic backdrop called for impeachment proceedings against President Dilma Rousseff on December 2. Charges against her include the violation of Brazil’s fiscal laws and the mishandling of government finances to pursue her re-election campaign in 2014, as per the Capital Economics report. Since Dilma Rousseff’s public support rating is now at record-low, Brazilian stocks rose on December 2. Since last year, we have seen that any news against Rousseff turns out favorable for the stocks as her administration is known to implement excessive red tape in the private sector. The investing world is now betting on an expulsion of the president, though this will take months if it all materializes. Moreover, UBS analysts commented that the political surroundings could be better off in 2016 to promote growth-oriented reforms and hence took a neutral stance on Brazilian stocks and sovereign debt (despite Brazil’s credit rating was slashed to junk in September) and even the currency real. However, bearish views are there as well. Experts like JP Morgan believe that no matter what happens to Rousseff, this impeachment process will delay government work and ‘paralyze the government’s fiscal agenda during the next month’ as the spotlight will be entirely on the political movement now, which might translate into a deeper recession. Whatever the case, the markets cheered the expected end of the prolonged political deadlock and pushed up these Brazilian stocks and ETFs, though we are unsure about the sustainability of these gains. Stocks to Watch Itaú Unibanco Holding S.A. (NYSE: ITUB ) The company functions through commercial bank, retail, consumer credit retail and wholesale bank segments in Brazil and overseas. As financial stocks moved up, this Zacks Rank #3 (Hold) banking giant advanced over 6% in the last two days (as of December 3, 2015). The stock has a Momentum score of ‘A’. Petróleo Brasileiro S.A. – Petrobras (NYSE: PBR.A ) The largest publicly-traded Latin American oil company has long been fraught with corruption scandal. Its high-profile officials were allegedly involved in multi-billion dollar laundering and bribery. Also, the Brazilian government, the company’s majority shareholder, has a history of political interference in Petrobras’ affairs. Thus a probe into Rousseff’s government sprung sweet surprises for this company. PBR has a Zacks Rank #3 and added 8.6% in the last two days. PBR has a Zacks Value score of ‘A’. Centrais Elétricas Brasileiras S.A. – Eletrobras (NYSE: EBR ) The company funcations in the power utility sector and together with its subsidiaries, generates, and distributes electricity in Brazil. In the last two days, the stock advanced about 12.6%. ETFs to Watch The ultra-popular large-cap MSCI Brazil Index Fund (NYSEARCA: EWZ ) added about 5.9% in the last two days (as of December 3, 2015) on blows against Rousseff and also advanced about 0.1% after hours. However, the fund is down 34.6% so far this year. EWZ has a Zacks ETF Rank #4 (Sell) with a High risk outlook. However, due to slumping activities in Brazil, it is wiser to stay away from small-cap ETFs like Market Vectors Brazil Small-Cap ETF (NYSEARCA: BRF ) and iShares MSCI Brazil Small Cap Index (NYSEARCA: EWZS ) as small-cap stocks are tied more to domestic economic activities. Still BRF and EWZS were up over 3.6% and 5.9% respectively in the last two days on calls for Rousseff’s impeachment. Both BRF and EWZS carry a Zacks Rank #5 (Strong Sell) and are down respectively 43.3% and 45.5% so far this year. Original Post

RingCentral Rings Louder As Phone Systems Go To Cloud

W hile mobile phone adoption rates keep rising, legacy telephone systems still largely tie down the office work world. That’s good news forRingCentral ( RNG ). As a provider of less costly, cloud based software as a

Is Abenomics 2.0 Boosting Japan Mutual Funds?

In late September, Japanese Prime Minister Shinzo Abe had announced the second stage of his popular Abenomics plan. The “stage two” plan is aimed to resuscitate the Japanese economy. Among other things, the goal is to boost Japan’s gross domestic product by a significant 20% to $5 trillion by 2020. Following this, Japan Stock mutual funds have gained relatively well. In October, the sector gained 7.9% and in November Japan stock funds added 1.3%, which helped it to finish among the top gainers for the month. Morningstar data also shows that Japan Stock funds are leading one-month gains currently. Abe unveiled a new set of economic initiatives, which he dubbed as “Abenomics 2.0.” He promised to take Japan into a new era of prosperity. His proposals have, however, been met with both bouquets and brickbats. Some economists and market watchers have questioned the viability of the proposals. For instance, executives from leading business lobby termed Abe’s numerical targets as “outrageous” and “impossible.” During the first phase of Abenomics, Japan’s benchmark, Nikkei 225, had shown a significant uptrend. Though it is too early to predict whether the new targets are already having a positive impact, Nikkei 225 has gained 4.5% since Sept. 29. The focus once again shifts to Japan mutual funds, which were topping the charts earlier this year before stumbling in the third quarter. Japan’s economic situation is not as fragile as is widely believed. So, it’s not a bad idea to pick Japan mutual funds which are poised to benefit under existing conditions and will gain further as the economy continues to gather steam. Abenomics 2.0: The Three Arrows Abe outlined several new policy measures late last month, which he calls “Abenomics 2.0.” Abe spoke of new targets or his new “three arrows”: achieving a higher GDP over the next five years, providing support for child care and better social security. The last two are aimed at improving child rearing and care for the elderly for economically distressed families. Abe also aims to boost social security by offering care to the nearly 150,000 people who are slated to enter nursing homes. He also said that he would increase employment opportunities for the retired. Several prominent newspapers and economists have questioned where Abe will find the resources to fuel the last two initiatives. Has There Been A Positive Trend? Market watchers and economists have also pointed to the fact that several of Abe’s initial targets are still unfulfilled. Others question the efficacy of the first phase of Abenomics and have argued that only the monetary policy has proven to be effective. However, an assessment of the state of Japan’s economy by the Financial Times tells us a different story. The study has praised Abenomics’ record on improving corporate governance standards. The objective of these changes has been to increase return on equity and raise the number of independent directors. The ability to push through reforms in the agricultural sector has also been praised. Japan’s unemployment rate of 3.3% is much lower than several developed economies. Real monthly wages recorded their first yearly increase in July in more than two years. Additionally, the average wage increase for fiscal 2015 is 2.2%, the highest level achieved in 17 years. Japan Mutual Funds Japan Stock fund category had emerged as the best gainer in the first half of 2015. The market rout since then has dragged down major categories. However, Japan funds were less affected than its neighboring regions. Japan funds are up nearly 14% year to date, according to Morningstar. This is the best year-to-date gain so far among all fund categories. Banking on the optimism, investors interested in investing in Japan region may bet on the following three mutual funds. These funds carry either a carry a favorable Zacks Mutual Fund Ranks. The following funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform their 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. The minimum initial investment is within $5,000. These funds are in the green over year to date and one-year periods. The three- and five-year annualized returns are also favorable. Fidelity Japan Smaller Companies Fund No Load (MUTF: FJSCX ) seeks capital appreciation over the long term. It invests most of its assets in Japanese securities or other instruments economically connected with Japan. FJSCX invests in securities of companies with market cap similar to those listed in Russell/Nomura Mid-Small Cap Index or the Japanese Association of Securities Dealers Automated Quotations (JASDAQ) Index. Fidelity Japan Smaller Companies currently carries a Zacks Mutual Fund Rank #1. FJSCX has gained 13.7% and 13.5% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 18.7% and 12%. Annual expense ratio of 1% is lower than the category average of 1.43%. T. Rowe Price Japan Fund No Load (MUTF: PRJPX ) invests a lion’s share of its assets in companies located in Japan. The fund invests in companies of all sizes and across Japanese industries. Managers use a bottom-up stock selection process while also being aware of industry outlooks. T. Rowe Price Japan currently carries a Zacks Mutual Fund Rank #1. PRJPX has gained 16% and 11.7% over year-to-date and one-year periods, respectively. The 3- and 5-year annualized returns are respectively 12.7% and 7.8%. Annual expense ratio of 1.05% is lower than the category average of 1.43%. Rydex Japan 2x Strategy Fund A (MUTF: RYJSX ) seeks to give returns that correspond to two times the performance of the fair value of the Nikkei 225 Stock Average. RYJSX invests in common stocks having market capital within the range of those listed in the index. RYJSX invests a lion’s share of its assets in securities that have the potential to return two times the performance of the underlying index. Rydex Japan 2x Strategy Fund Class A currently carries a Zacks Mutual Fund Rank #2. RYJSX has gained 20.3% and 11.8% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 20% and 6.8%. Annual expense ratio of 1.54% is lower than the category average of 2.03%. Original post