Tag Archives: handle

China Internet ETFs Look To Rebound In 2015

Summary Investors can use China-related ETFs to position for a turnaround in Chinese tech names. Closer look at a Chinese tech-specific ETF and broad China ETFs with tech exposure. An overview of the Chinese technology space. By Todd Shriber & Tom Lydon Despite the fervor surrounding Alibaba’s (NYSE: BABA ) September initial public offering, 2014 has been a disappointing year for exchange traded funds with exposure to Chinese Internet stocks. The silver lining in that scenario is that investors can scoop up ETFs such as the KraneShares CSI China Internet Fund (NASDAQ: KWEB ) and the Powershares Golden Dragon Halter USX China Portfolio (NYSEARCA: PGJ ) at favorable prices in anticipation of a significant 2015 rebound by Chinese Internet stocks. BitAuto Holdings (NYSE: BITA ) and Vipshop Holdings (NYSE: VIPS ) “may both advance an additional 32% in the next 12 months, according to average analyst estimates compiled by Bloomberg,” according to an article written for the news agency by Belinda Cao and Elena Popina . KWEB, the lone U.S.-listed ETF devoted exclusively to Chinese Internet stocks, allocates about 7.2% of its combined weight to Vipshop and Bitauto. The ETF has traded slightly lower this year. PGJ, the PowerShares offering, is not a dedicated China Internet ETF , but the fund does allocate a combine 58% of its weight to the technology and consumer discretionary sectors. That includes a 10% combined weight to Vipshop and BitAuto. While KWEB and PGJ have struggled this year, more traditional China ETFs with large weights to state-controlled enterprises have jumped amid rallies for those stocks, particularly financial services shares. For example, the iShares China Large-Cap ETF (NYSEARCA: FXI ) , the largest China country-specific ETF, is up 8.5%. Still, market observers see companies with exposure to the Chinese consumer, such as those held by KWEB and PGJ, as favorable plays for investors in 2015. “China’s 632 million Internet users still represent less than half of the country’s population, whose middle class was estimated at 200 million people by Alibaba Chief Executive Officer Jack Ma. Government data indicate the user total could rise to 850 million by 2015,” according to Bloomberg. Much of the 2015 potential and promise for China Internet ETFs will boil down to Alibaba’s ability to impress investors. The stock is KWEB’s largest holding at 10% of the fund’s weight. Although Alibaba is not currently a member of PGJ’s lineup, it could be in the future and it is unlikely that the ETF would rally in significant fashion if Alibaba languishes. The average analyst price target on Alibaba is just over $120 with two analysts forecasting prices of at least $130 . The stock currently trades around $106. The newly minted Emerging Markets Internet & Ecommerce ETF (NYSEARCA: EMQQ ) is another idea for investors to consider in the search for Chinese Internet exposure. EMQQ, which debuted in November, is not a dedicated China ETF, but the Emerging Markets Internet & Ecommerce Index devotes a significant portion of its weight to Chinese Internet names, including Alibaba, Tencent Holdings ( OTCPK:TCEHY ), JD.com (NASDAQ: JD ), Baidu (NASDAQ: BIDU ) and Vipshop. Those stocks combine for a third of the index’s weight . Nearly 30 of EMQQ’s holdings are Chinese companies. EMQQ’s underlying index allocates a combined 7.5% to Vipshop and BitAuto. KraneShares CSI China Internet Fund (click to enlarge) Todd Shriber owns shares of Alibaba.

Americas’ Oil Price War Could Boost Refiner-Heavy ETF

Summary Canada and Mexico are competiting to sell to refiners in the Gulf Coast. Greater competition could cause more discounts to the benefit of refiners. An energy-sector ETF with a heavy refiner exposure. As Canada and Mexico compete for oil processing along the U.S. Gulf Coast, West Texas Intermediate oil prices may remain depressed, but oil refiners and sector-related exchange traded funds could come out on top. The new Seaway Twin pipeline could double the amount of heavy Canadian crude oil to the Gulf, pressuring crude from Mexico and Venezuela that have traditionally fed refineries along Texas and Louisiana, Bloomberg reports. The greater competition could cut down costs for oil refiners. For instance, in December, state-owned Petroleos Mexicanos raised its discount for U.S. buyers by the most since August 2013. Now, Valero Energy (NYSE: VLO ) and Marathon Petroleum Corp (NYSE: MPC ), which invested in equipment to refine heavy crude, will benefit the most from the increased Canadian supply. While there are no specific oil refiner ETFs available, the PowerShares Dynamic Energy Exploration & Production Portfolio (NYSEARCA: PXE ) is a refiner heavy ETF , with components like the Occidental Petroleum (NYSE: OXY ), which like Exxon (NYSE: XOM ) and Chevron (NYSE: CVX ) is an integrated oil firm and has refining operations, and PXE features four pure play refiners among its top 10 holdings for a combined 18% of the ETF’s overall holdings. Specifically, VLO is 5.2% and MPC is 5.0%. The U.S. Gulf Coast remains the go-to area for heavy crude oil processing in the Americas. Consequently, Latin American countries will fight to maintain their spot in the U.S. “U.S. refineries built out their capacity to run heavy barrels,” John Auers, executive vice president at Dallas-based Turner Mason & Co, said in the Bloomberg article. “Refineries in the rest of world aren’t built to run heavy barrels.” Consequently, in an attempt to stay competitive, Mexico’s discount to refineries and its reliance on oil revenue could also weigh on the iShares MSCI Mexico Capped ETF (NYSEARCA: EWW ) . While EWW has no exposure to the energy sector, oil sales still accounts for over 25% of Mexico’s government revenue . WTI crude was down 2.5% Monday to $53.4 per barrel. The United States Oil Fund (NYSEARCA: USO ) , which tracks West Texas Intermediate crude oil futures, has plunged 40.9% over the past three months. PowerShares Dynamic Energy Exploration & Production Portfolio (click to enlarge)

Keep A Diversified Portfolio For 2015

Marc Faber is of the opinion that investors need to remain diversified across asset classes in 2015 and I am in full agreement with this opinion. I am overweight on US equities and Indian equities for 2015 while I am underweight on Chinese Equities and Euro-zone equities. US Treasury bonds are an attractive investment for 2015 along with corporate bonds that provide an attractive yield. In an interview with Bloomberg , Marc Faber opined that he expects volatility and surprises in the coming year. In line with this view, Marc Faber suggested that investors should remain diversified across asset classes in the coming year. I am in full agreement with his views and this article discusses some interesting investment options for the coming year. I want to start with relatively safe assets and my first choice for 2015 is US Treasury bonds. I must add here that I am bearish on US Treasury bonds for the long-term. However, for 2015, I believe that Treasury bonds are a “must have” for the portfolio. As the chart below shows, the global economy is on a decline and the advanced economy (excluding US) is slowing down sharply. Even China’s growth for 2015 remains uncertain with negative surprises coming from the economic data. In such a global economy outlook, it is important to own Treasuries and I believe that US Treasuries will rally from current levels through 2015. In particular, the first half of 2015 will be better than the second half. Investors can therefore consider exposure to Vanguard Long-Term Government Bond ETF (NASDAQ: VGLT ) and the Vanguard Short-Term Bond ETF (NYSEARCA: BSV ). The second investment option in my radar is the corporate bond ETF. As US markets trend at record highs and US corporate profit remains robust, corporate bond ETF’s are an exciting investment option. The interest in corporate bonds is evident with the Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ: VCIT ) witnessing robust fund inflow according to this report. The intermediate bond ETF provides a healthy SEC yield of 3.16%, making it an attractive investment option when the US economy and corporate profits are likely to be strong in 2015. The Vanguard Long-Term Corporate Bond ETF (NASDAQ: VCLT ) and the Vanguard Short-Term Corporate Bond ETF (NASDAQ: VCSH ) also provide a SEC yield of 4.38% and 1.68% respectively. I believe that investors can remain invested in these ETF’s through 2015. Gold (NYSEARCA: GLD ) has been my choice among safe assets in the past. However, I am not bullish on gold for the first half of 2015. I believe that a strong dollar will keep gold lower at least in the first half of 2015. Investors with a long-term view can however consider gradual exposure to gold at current levels. While the near-term outlook is negative, gold remains a good investment and a good currency with a 3 to 5 year investment horizon. My opinion is to have limited exposure to gold in 2015 as high exposure can potentially harm the returns prospects for the portfolio. Coming to equities, I believe that US equities will continue to perform well in 2015 and I have discussed reasons in the past for my view. The primary reasons being a resilient US economy, weak Euro-zone, Japan and Chinese economies and a strong job market to add to a the robust markets. However, I must caution here that the broad index (NYSEARCA: SPY ) might not continue to provide robust returns. Since March 2009, the US index is up by 200% and I don’t expect the same rate of upside to continue in the coming year. My view therefore is to remain selective in terms of picking stocks and sectors instead of exposure to the broad based index. With oil prices plunging, there are some very attractive opportunities in the oil and gas space and I recently wrote on Occidental Petroleum (NYSE: OXY ), which is a good pick for 2015 in my view. I also remain positive on Encana (NYSE: ECA ) among oil and gas stocks in the coming year. I believe that in terms of steady performance, the healthcare sector will remain a bright spot in the coming year and investors can consider exposure to the Vanguard Healthcare ETF (NYSEARCA: VHT ). I must also mention here that the US consumer confidence is at a record high since the financial crisis on the back of a stronger economy and improving jobs markets. I believe that for the first quarter of 2015, consumption based themes will do well. I am bullish on Wal-Mart (NYSE: WMT ) for the first quarter of the year and depending on the consumption pattern and improvement in the jobs market, the stock investment horizon can be extended. Among global markets, I am most bullish on Indian equities and I believe that the Indian markets can be a star performer in the coming year. The Indian government has promised big reforms in the budget coming up in March 2015 and I believe that there is likely to be a pre-budget rally. Further, interest rates have peaked in India and with inflation cooling down; I expect a series of rate cuts in the coming year. That will provide an additional boost to the markets and interest rate sensitive sectors such as banking and infrastructure. In the banking space, my stock pick is ICICI Bank (NYSE: IBN ), which is India’s largest private sector bank. As reforms unfold and as interest rates cuts come in 2015, the bank is best positioned to benefit. Besides the option of directly investing in Indian markets, investors can consider investment through ETF’s. Considering the broad markets, iShares India 50 ETF (NASDAQ: INDY ) and iShares MSCI India ETF (BATS: INDA ) are also good investment options. While the former gives exposure to 50 largest Indian stocks, the latter gives exposure to large and mid-sized companies in India. In conclusion, 2015 is likely to be volatile and the best strategy is diversification. On an overall basis, I remain overweight on US and Indian equities and underweight on China and Euro-zone equities. However, investors need to apply bottom-up approach to investing even in attractive markets. I expect oil to remain largely in the range of $50 to $70 per barrel for the coming year. However, I do expect some oil and gas companies to perform well and I have mentioned some names in the article.