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A Case For The South Korea ETF

EWY has enjoyed less volatility than most emerging market ETFs & single-country funds. SK Auto Industry picked up third quarter. Hyundai is making inroads to the luxury car space, bigger profit margins. The iShares MSCI South Korea Capped ETF (NYSEARCA: EWY ) , which tries to reflect the performance of the MSCI Korea 25/50 Index, is down less than 4% year-to-date, a performance that is nothing to get excited about but one that is also noticeably better than widely followed, diversified emerging markets exchange traded funds. Since EWY, the largest South Korea trading in the U.S., has a reputation for being less volatile than benchmark emerging markets ETFs and plenty of single-country funds as well, it is not surprising the fund has been less bad than its counterparts. South Korea’s auto industry also picked up in the third quarter, with Hyundai Motors Co ( OTC:HYMPY ) revealing a 6.3% increase in car sales over October while Kia Motors ( OTC:KIMTF ) posted a 16% surge in sales, Maria Levitov reported for Bloomberg . Looking ahead, Hyundai is making inroads into the luxury car brand with its new Genesis premium car brand as a way to target high-end motorists and reverse sliding profits, Reuters reported. The $3.2 billion EWY allocates 21.5% of its weight to the giant South Korean conglomerate Samsung ( OTC:SSNNF ), meaning the ETF has hefty 36.3% weight to the technology sector. “EWY is down 16% overall from its high at 62.93 in April, due to a strong U.S. dollar, the devaluation of the Chinese yuan, and the crash in equity prices in China this past summer. Fundamentally, however, the Korean economy itself has not remarkably declined in a way that justifies the 16% decline in EWY’s price since July 2014. This has created a solid entry point for investors looking for strong growth potential over the mid-term,” according to a separate Seeking Alpha analysis of EWY. Higher dividend payouts and stock split are encouraging some investors. Korean companies are facing increased pressure from the government to raise dividends, which are among the lowest of any large economy in Asia. However, with Samsung shares tumbling, shareholder rewards probably are not enough to stoke significant interest in South Korean stocks in the near-term. [Samsung Weighs on South Korea ETFs] The low energy prices and cheap financing have also supported investor sentiment and positive outlook for earnings growth ahead. South Korea is a net energy importer, implying that it is one of the emerging markets that should be benefiting from low energy prices.

11 Most Popular Currency-Hedged ETFs

Currency hedging strategies have been in vogue since the start of this year given the ultra-loose monetary policy across the globe in stark contrast to the U.S. Fed policy of tightening its stimulus program. The popularity saw a rise last month when the Fed hinted at a modest hike in interest rates in December. The diverging policies have been pushing the U.S. dollar higher and other currencies lower. While monetary easing is making international investment a compelling opportunity in the U.S., a strong dollar could wipe out gains when repatriated in U.S. dollar terms, pushing international investment into the red even when international stocks performed well. As a result, investors flocked to currency-hedged ETFs to tap bullish international fundamentals, dodging the effects of a strong greenback. This is especially true as the currency-hedged funds look to strip out currency exposure to a foreign economy via the use of currency forwards or other instruments that bet against the non-dollar currency, while at the same time, offering exposure to foreign stocks. Given this, we have highlighted 11 currency-hedged ETFs for investors that are extremely popular in the market: WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) The ETF tracks the WisdomTree Europe Hedged Equity Index holding 129 securities with moderate concentration on the top 10 holdings at 25.5%. It is pretty well spread across a number of sectors, with consumer staples, industrials, consumer discretionary, healthcare and financials taking double-digit exposure each. Among countries, Germany (25.9%), France (24.3%), the Netherlands (17.2%) and Spain (16.4%) dominate the holdings list. The fund has AUM of $21.3 billion, and sees an average daily volume of about 4.9 million shares. It charges 58 bps in annual fees and gained 13.5% in the year-to-date time frame. The product has a Zacks ETF Rank of 3 or a “Hold” rating with a Medium risk outlook. WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) With AUM of $17.1 billion, this ETF targets the Japanese equity stock market without the currency risk by tracking the WisdomTree Japan Hedged Equity Index. Holding 314 stocks in its basket, the product is moderately concentrated across securities, with none holding more than 4.84% share. Consumer discretionary and industrials take the top two spots with 24.6% and 23.2% share, respectively, while information technology and financials round off the top four. The fund trades in solid volume of more than 6 million shares per day, and charges 48 bps in annual fees. It has risen nearly 14% so far this year, and has a Zacks ETF Rank of 2 or a “Buy” rating with a Medium risk outlook. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) This fund targets the developed international stock market with no currency risk, and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 920 securities in its basket, with none holding more than 1.95% share, and charges 35 bps in fees. It is skewed toward the financials sector, which makes up one-fourth of the portfolio, while consumer discretionary, industrials, consumer staples and healthcare round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 23%, closely followed by United Kingdom (17%), France (10%) and Switzerland (10%). With an asset base of around $13.9 billion and average daily volume of about 4 million shares, the fund has gained 7.5% so far this year and has a Zacks ETF Rank of 3 with a Medium risk outlook. Deutsche X-trackers MSCI Europe Hedged Equity ETF (NYSEARCA: DBEU ) This product is the second popular European play that follows the MSCI Europe US Dollar Hedged Index. It holds 445 securities in its basket, which are widely spread out across components, with each holding less than 3% of assets. United Kingdom takes the top spot at 27%, while France, Switzerland and Germany round off the next three spots. From a sector look, financials accounts for the largest share at 22.5%, closely followed by consumer staples (14.9%) and healthcare (13.7%). The fund has amassed $3.8 billion in its asset base and trades in solid volume of more than 1.3 million shares a day. It charges 45 bps in fees per year, and has returned about 8% so far this year. The fund has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares Currency Hedged MSCI EAFE ETF (NYSEARCA: HEFA ) This fund provides a broad foreign market play without currency risks. It focuses on the EAFE region – Europe, Australasia, Far East – for exposure, and follows the MSCI EAFE 100% Hedged to USD index. It is basically a holding of the iShares MSCI EAFE ETF (NYSEARCA: EFA ) with currency hedge tacked on. Financials dominates the fund’s return with one-fourth share, while consumer discretionary, industrials, consumer staples and healthcare also get double-digit allocation each. Top nations include Japan and United Kingdom, with double-digit exposure, while France, Switzerland and Germany round out the top five. The fund has AUM of $3.1 billion and average daily volume of roughly 1.4 million shares. It charges 35 bps in annual fees and has gained about 8% in the year-to-date time frame. HEFA has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares Currency Hedged MSCI EMU ETF (NYSEARCA: HEZU ) This ETF is appropriate for investors looking invest in euro zone stocks. It follows the MSCI EMU 100% USD Hedged Index, and is a play on the popular unhedged fund iShares MSCI EMU ETF (NYSEARCA: EZU ) with a hedge to strip out the euro currency exposure. The fund holds 245 well-diversified securities in its basket, dominated by financials at 22.4% and followed by consumer discretionary (13.9%), industrials (12.7%) and consumer staples (11.1%). The ETF has amassed $1.9 billion in its asset base, and trades in solid volumes of more than 1.3 million shares a day. The fund charges 50 bps in annual fees from investors and has delivered impressive returns of nearly 14% so far this year. It has a Zacks ETF Rank of 3 with a Medium risk outlook. Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) This product tracks the MSCI Japan US Dollar Hedged Index, which provides exposure to the Japanese equity markets and hedges the Japanese yen to the U.S. dollar by selling Japanese yen forwards. The fund holds 319 securities in its basket, with the largest allocation going to Toyota Motor (NYSE: TM ), while other firms make up less than 3% of its assets. From a sector look, the ETF is well diversified, with consumer discretionary, financials, industrials and information technology accounting for double-digit allocation each. The fund has AUM of $1.9 billion and average daily volume of around 487,000 shares. Its expense ratio came in at 0.45%. The product is up about 14.8% so far this year, and has a Zacks ETF Rank of 2 with a Medium risk outlook. iShares Currency Hedged MSCI Germany ETF (NYSEARCA: HEWG ) This ETF targets the German equity market without the currency risk. It follows the MSCI Germany 100% Hedged to USD Index, and is basically a holding of the iShares MSCI Germany ETF (NYSEARCA: EWG ) with currency hedge tacked on. Consumer discretionary, financials, healthcare, materials and industrials are the top five sectors of the fund. The fund has accumulated $1.5 billion in AUM and charges 53 bps in annual fees. Volume is good, as it exchanges more than 1.2 million shares, on average, on a daily basis. It has added 11% this year, and has a Zacks ETF Rank of 2 with a Medium risk outlook. iShares Currency Hedged MSCI Japan ETF (NYSEARCA: HEWJ ) This is another currency-hedged option to play Japanese equity, and is a hedged version of the popular iShares MSCI Japan ETF (NYSEARCA: EWJ ). Holding 320 stocks in its basket, consumer discretionary takes the top spot at 21.3%, closely followed by financials and industrials. The ETF has AUM of $712 million and sees volume of more than 593,000 shares a day. The expense ratio came in at 0.48%. The fund has gained 14.5% so far in the year and has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree International Hedged Quality Dividend Growth ETF (NYSEARCA: IHDG ) This product provides exposure to the dividend-paying companies with growth characteristics in the developed world ex U.S. and Canada and hedge exposure to fluctuations in the U.S. dollar and foreign currencies. This can be easily done by tracking the WisdomTree International Hedged Quality Dividend Growth Index. In total, the fund holds 213 stocks in the basket, with consumer staples and consumer discretionary as the top two sectors. In terms of country profile, United Kingdom takes the top spot at 20.2%, while Japan and Switzerland round off the next two spots with 13.3% and 10.2% share, respectively. WisdomTree Germany Hedged Equity ETF (NASDAQ: DXGE ) This German ETF follows the WisdomTree Germany Hedged Equity Index, holding 75 securities in its basket. It has a slight tilt toward the consumer discretionary sector with 21.6% share, followed by double-digit exposures in financials, industrials, materials and healthcare. It has managed assets worth $305.4 million and trades in good volume of 202,000 shares a day, on average. The fund charges 48 bps in annual fees, and is up 11.4% so far this year. DXGE has a Zacks ETF Rank of 2 with a Medium risk outlook. Original Post

GLD Continues To Lose Its Shine

The price of GLD continues to fall. The recovery of the U.S. economy keeps raising the odds of a rate hike in December, which pressures down GLD. This week’s GDP and PCE reports will provide additional insight into the direction of the U.S. economy and could indirectly move the price of the fund. The weakness in the gold market has also kept down the shares of the SPDR Gold Trust ETF (NYSEARCA: GLD ). As the U.S. economy keeps showing signs of slow progress, the market raises the odds of a December rate hike. And this trend keeps pushing down the price of GLD. This week’s GDP and PCE will provide additional information about the direction of the U.S. economy. Additional strong results could drive GLD further down. This week, the second estimate of the U.S. GDP for Q3 will be released. In the first estimate, the GDP growth rate was only 1.5%, which was much lower than that in Q2. In terms of market reaction, even though the financial markets do tend to react to the progress of the U.S. GDP, the price of GLD doesn’t seem, as presented in the following chart, to have a consistent impact from the changes in GDP. (click to enlarge) (Source: BEA, Google Finance) The chart presents the relation, or lack of it, between the percent change in the price of GLD on the day the GDP report comes out and the “surprise” in the headline figure of the GDP annual growth rate – a positive percentage point indicates a better-than-expected growth rate. The dots don’t show a clear upward or downward trend to suggest a correction. The GDP growth rate tends to coincide with the movement of the U.S. dollar. And the latter also has a mid-strong correlation with the price of GLD – as the U.S. dollar rises, GLD tends to fall. But directly, GLD doesn’t seem to react in a more consistent way to the surprises of GDP’s headline figure. How about the relation over the long run? Although the slow recovery of the U.S. economy may have contributed, at least indirectly, to the decline in the price of gold, when you look at the two data series over the past decade, it’s hard to see any correlation as well. (click to enlarge) (Source: FRED ) These charts suggest that the progress of U.S. dollar, changes in long-term yields, the concerns over rising inflation and even, to a lesser extent, changes in the supply of gold are likely to be the main direct factors moving GLD. Does this mean the GDP report doesn’t matter? I don’t think so, especially at this stage when the FOMC contemplates whether or not to raise rates. After all, the market estimates that the chances for a rate hike next month by the FOMC are 74%. At the beginning of the month, these odds were lower than 50%. As the chances continue to climb, GLD tends to fall. It’s true that the Fed’s dual mandate refers to employment and price stability, not growth. These two targets are related to the GDP growth rate. And if GDP doesn’t rise, the Fed will be less incline to raise rates. Currently, the market expects GDP growth to come in higher than the first estimate of 2%. Any higher figure could indicate the U.S. economy is doing better than was previously estimated – another positive sign that could keep GLD prices down. It’s also worth noticing the components of the GDP report, such as changes in inventories, investments and personal spending. This week, we also have the PCE report – another indicator for the progress of U.S. inflation. In the past report, the core PCE stood at 1.3% year on year (as of September). The Fed’s annual outlook was 1.4% . If the core PCE doesn’t start to pick up, the Fed expects next year’s core PCE will rise to 1.7%. This may not delay the Fed from raising rates in December, but rather, it may maintain a very gradual rate hike pace next year, which will actually keep interest rates low and GLD from crashing. The price of GLD is still likely to further slowly decline. This week’s reports will provide additional information about the progress of the U.S. economy. As the U.S. dollar and long-term interest rates continue to climb, the downward pressure on GLD will intensify. It doesn’t mean the fund couldn’t experience short-term rallies – especially if the risk in the financial markets rises or the U.S. economy doesn’t progress or U.S. dollar changes course again and depreciates, just to name a few factors. But these short-term rallies aren’t likely, for now, to change the fact of the descent of GLD. For more please see ” GLD Continues to lose its appeal ”