Tag Archives: european

RBS: Sell All Of It, Everything Except High-Quality Bonds

Original post By Stuart Burns We like to think of ourselves as optimists at MetalMiner. If given the option, we prefer the glass half full than the glass half empty, so an article in the London Telegraph and many other newspapers this week reporting RBS Bank’s latest client note makes depressing reading, but unfortunately worthy of discussion. The note advises clients to “Sell everything except high-quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel. It All Must Go! Nor is RBS playing a new tune; since November, it has been warning the oil price and stock markets are headed lower, sure enough the oil price has continued to fall, dropping to a 12-year low of $30.41 for Brent and $30.43 for West Texas Intermediate this week. Click to enlarge Source: Telegraph Newspaper The markets are clearly spooked and by a number of factors. China’s stock market is being kept alive only on the oxygen of government support via state enterprises buying shares. Oil consumption has stalled due to slow growth and warm weather, and oil supply continues to grow as Iran gears up to enter the market. This year, the biggest factor seems to be the fear of a devaluation of the Chinese yuan, a move Beijing is seeking to reassure the markets is not on the cards. But, guess what? No one believes them. Fears over China, therefore, are multiplying and RBS says, “China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, “and the bank’s Andrew Roberts, research chief for European economics and rates, expects Wall Street and European stocks to fall by 10% to 20% this year. Larry Summers, the former US Treasury Secretary, in more measured terms, agrees saying it would be a mistake to dismiss the current financial squall as froth. What Does This Mean for Metals? Metals prices have taken their cue from energy and have been weak since the start of the month, but if RBS is right, they could see support in the months ahead. Prices have, in part, been weak due to a stronger dollar, but RBS suggests the Federal Reserve won’t raise rates again at the March meeting and by the summer may be looking at a rate reduction. Either way, if rates don’t rise as the market had been expecting and had priced into the dollar, we could see dollar weakness in 2016 removing one of the factors depressing metal prices. It’s true, global growth is muted, global trade is down and loans are contracting, all in an environment of record debt, not a great backdrop for companies to invest and create growth. Yet, there are some bright spots. Growth in Europe is looking more positive as austerity has largely come to an end. Money supply in Germany is up 10% and growth in the US has remained solid if unspectacular. What to Do? Would you follow RBS’s advice if you were its client? Would you get out of everything? Bank of America runs a Bull & Bear Index that tracks global equity prices and is supposed to give warning of contrarian buy signals. We have all heard of the saying “the night is darkest just before the dawn.” Well, BOA’s index is supposed to peak over the horizon and see if dawn is approaching. Click to enlarge Source: Bank of America As you can see, 88% of global indexes are now trading below their 200-day and 50-day moving averages. The index is therefore at an ultra-negative level of 1.3, but BOA is not suggesting we take our cue and rush out to buy shares. Even though the index has a good track record, the bank says we need certain “catalysts” to be in place, not least a stabilization of the Chinese yuan and oil prices, better Purchasing Managers’ Index data and a halt to the rising dollar before it would say, with any confidence, RBS has got it wrong and the BOA index has it right. As so often before, then, it is down to China. We watch and wait, and hope events unfold more positively in the weeks and months ahead than they have started to so far this year.

More Currency-Hedged ETFs From WisdomTree

WisdomTree Investments (NASDAQ: WETF ) is the name of the game in the currency-hedged equities ETFs space. Though other big issuers like State Street and bellwether iShares of BlackRock are now looking to beef up their currency-hedged portfolio, WisdomTree seems in no mood to give up its top rank among the currency-hedged ETFs’ space (read: Can Anyone Match WisdomTree in Currency-Hedged ETFs? ). After all, the investing paradigm will now be in focus as the Fed is on the course of policy tightening and the most developed economies are walking along the easy-money path. Among them, the Euro zone and the Japan are under the spell of QE polices. Thanks to this policy differential, the greenback will likely gain strength in the coming days while other developed currencies will lose it. Probably this is why WisdomTree rolled out four currency-hedged ETFs lately, each with a focus on dividends. Let’s delve a little deeper: WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM ) The newly launched fund seeks to provide exposure to dividend-paying companies in the industrialized world ex U.S. and Canada while hedging exposure to fluctuations between the U.S. dollar and foreign currencies (read : 2 Excellent Dividend Growth ETFs in Focus ). With this focus, the index currently holds a well-diversified basket with HSBC Holdings, Nestle SA and GlaxoSmithKline Plc as the top three holdings. In fact, the fund also provides a nice exposure to various sectors. Financials tops the list with 47.9% allocation, followed by Industrials with 24.5%, Consumer Staples with 23.4% and Consumer Discretionary with 22.9% of the basket. Country-wise, United Kingdom and Japan get double-digit exposure. The fund charges 35 bps in fees. Competition: The newly launched product is likely to face competition from quite a number of funds prevalent in the global equities space. Still, a few ETFs can emerge as strong contenders. The db X-trackers MSCI All World ex US Hedged Equity Fund (NYSEARCA: DBAW ) and the MSCI All World ex US High Dividend Yield Hedged Equity ETF (NYSEARCA: HDAW ) are some of the examples. WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (BATS: DDLS ) The fund looks to track the small-cap dividend-paying companies of the industrialized economy outside of the U.S. and Canada while offering currency-hedging exposure. The fund is pretty well spread out across components with no firm making up more than 0.56% of assets. Salmar ASA, Cofinimmo and Ladbrokes Plc are the top three holdings of the index. The ETF is skewed toward Industrials (48.8%), Consumer Discretionary (41.2%) and Financials (35.6%). In terms of country allocation, Japan (27.9%), U.K. (16.3%) and Australia (10.9%) take the leading positions. The fund’s net expense ratio is 0.43% annually. Competition: The foreign mid and small cap equities ETF space is relatively less jam-packed. In the set, while non-hedged small-cap ETFs like the FTSE All-World ex-US Small Cap Index ETF (NYSEARCA: VSS ) and the FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio ETF (NYSEARCA: PDN ) pose as threats, products like the Currency Hedged MSCI EAFE Small-Cap ETF (NYSEARCA: HSCZ ) may give direct competition. WisdomTree Dynamic Currency Hedged Europe Equity Fund (BATS: DDEZ ) This one follows the same strategy with a focus on European stocks. In terms of country allocation, Germany, France, Spain and Italy are leading with double-digit exposure. Company-specific concentration risk is moderate with around 4.25% exposure. Anheuser-Busch InBev NV, Banco Santander SA and Total SA are the top three holdings of the fund. The fund has a tilt toward Financials (46.9%) while Industrials, Consumer Discretionary, Consumer Staples and Utilities account for considerable weight in the fund. The fund’s net expense ratio is 0.43% annually. Competition: The hedged Europe equities ETFs are teeming with products. The WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) , the Deutsche X-trackers MSCI Europe Hedged Equity ETF (NYSEARCA: DBEU ) and the ProShares Hedged FTSE Europe ETF (NYSEARCA: HGEU ) are to give neck-and-neck competition. WisdomTree Dynamic Currency Hedged Japan Equity Fund (BATS: DDJP ) Obviously, there will be a separate fund for Japan with the above-mentioned investment objective. WisdomTree already has several successful currency-hedged ETFs on Japan. Toyota Motors, NTT DoCoMo, Nippon Telegraph are the top three holdings of the fund. No stock accounts for more than 4.60% of the basket. Consumer Discretionary (41.9%), Industrials (39.4%) and Financials (33.1%) are the top three sectors of the fund. Competition: The likely peers of this newbie are the WisdomTree Japan Hedged Dividend Growth ETF (NYSEARCA: JHDG ) , the WisdomTree Japan Dividend Growth Fund (NYSEARCA: JDG ) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) . Link to the original article on Zacks.com

ETF Update: A Look Back At December And 8 Funds To Kick Off The New Year

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community, and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.) Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. Recently, Zacks published a piece on the funds that launched in 2015 and gained in assets under management right away. They were the S PDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ), the SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ), the iShares Exponential Technologies ETF (NYSEARCA: XT ), the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEARCA: GEM ) and the SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ). While all of these funds saw strong support from investors, none ended the year with positive returns. Overall, markets took a turn for the worse in end of Q3 and beginning of Q4 and had to spend the rest of the year climbing out of that hole (most sectors are still stuck). There were 23 launches in December and no closures for the month. December Total Launches Fund Name Ticker SPDR S&P 500 Fossil Fuel Free ETF SPYX MomentumShares U.S. Quantitative Momentum ETF QMOM SPDR Russell 1000 Momentum Focus ETF ONEO SPDR Russell 1000 Low Volatility Focus ETF ONEV SPDR Russell 1000 Yield Focus ETF ONEY Direxion Daily S&P Biotech Bear 1X Shares LABS Direxion Daily Natural Gas Related Bear 3X Shares GASX Daily Healthcare Bear 3x Shares SICK Tierra XP Latin America Real Estate ETF LARE Elkhorn FTSE RAFI U.S. Equity Income ETF ELKU iShares FactorSelect MSCI Emerging ETF EMGF Pacer Trendpilot European Index ETF PTEU Pacer Autopilot Hedged European Index ETF PAEU Guggenheim Dow Jones Industrial Average Dividend ETF DJD SPDR S&P North American Natural Resources ETF NANR JPMorgan Diversified Return Europe Equity ETF JPEU WisdomTree Dynamic Long/Short U.S. Equity Fund DYLS WisdomTree Dynamic Bearish U.S. Equity Fund DYB MomentumShares International Quantitative Momentum ETF IMOM Legg Mason Developed ex-US Diversified Core ETF DDBI Legg Mason Emerging Market Diversified Core ETF EDBI Legg Mason US Diversified Core ETF UDBI Legg Mason Low Volatility High Dividend ETF LVHD Only a couple of these funds ended December with positive returns; it was a hard month to jump into the market. Hopefully, our rocky start to 2016 doesn’t set any trends in motion, otherwise these new launches from the last two weeks could have a hard time finding traction. There were 12 funds launched in the last 2 weeks, including the last 4 funds on the December launch list above. With tons to cover, let’s jump right in. Fund launches for the week of December 28th, 2015 Fund launches for the week of January 4th, 2016 Reality Shares launches its second ETF (1/6): The Realty Shares DIVCON Leaders Dividend ETF (BATS: LEAD ) was launched just over a year after the company’s first offering, the Realty Shares DIVS ETF. “Unlike many dividend funds based on decades-old dividend history or yield, the new passive ETF features rules-based stock selection and weighting using a proprietary dividend health rating methodology, DIVCON, which systematically ranks companies’ future dividend growth prospects based on a weighted average of seven factors,” according to a press release on Reality Shares’ site. WisdomTree rolls out 4 new Dynamic Currency ETFs (1/7): The following newly issued funds offer currency hedged exposure to international equities, each indicated in their names, and weighted by dividend yield: The WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM ), the WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (BATS: DDLS ), the WisdomTree Dynamic Currency Hedged Europe Equity Fund (BATS: DDEZ ) and the WisdomTree Dynamic Currency Hedged Japan Equity Fund (BATS: DDJP ). iShares launches 3 Adaptive Currency Hedged ETFs (1/7): The iShares Adaptive Currency Hedged MSCI Japan ETF (BATS: DEWJ ), the iShares Adaptive Currency Hedged MSCI Eurozone ETF (BATS: DEZU ) and the iShares Adaptive Currency Hedged MSCI EAFE ETF (BATS: DEFA ) are new additions to the iShares lineup. Like the WisdomTree funds launched on the same day, these funds offer currency hedged exposure to international equities, but weighted by market capitalization rather than dividend yield. All 7 of these funds were launched on the BATS exchange. There were no fund closures for the weeks of December 28th, 2015 or January 4th, 2016 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor, I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article.