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Precious Metal ETFs Regain Shine: Will It Last?

After giving appalling performances, precious metals regained their sheen in the past couple of weeks as volatility levels picked up. This is especially true in the backdrop of growing fears over the global economy and China instability. While the U.S. economy is improving, the devaluation of the China currency and its negative impact has gripped the global market, raising fears over the global slowdown. This coupled with sluggish growth in emerging markets has compelled investors to turn their focus on precious metals as a store of wealth and a hedge against market turmoil. In particular, the global risk-off trade situation has resulted in a flight to safety to gold. Additionally, the Fed minutes dented the chance of an interest rate hike next month, leading to a decline in the U.S. dollar and a rise in gold price. Further, the growing U.S. economy is supporting the strength in silver price as the bullion is used in a wide range of industrial applications. About 50% of the metal’s total demand comes from industrial applications while 30% comes from jewelry/silverware/coins and medal manufacturers. Coming to platinum and palladium, the automotive industry, mainly catalytic converters for vehicles, is a big driver of demand. The industry is experiencing huge growth given increasing consumer confidence, rising income and of course cheap fuel. The bullish trend in the precious metals is likely to continue at least in the near term especially given the China-led global worries and the slumping stock market. Below, we have highlighted four winners from this corner of the commodity world over the past 10 trading sessions. Each of these has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook: ETFS Physical Platinum Shares ETF (NYSEARCA: PPLT ) This fund tracks the performance of the price of bullion platinum, before Trust expenses. With about $497 million in AUM, this is the largest and the only physically backed platinum product and kept in Zurich or London in plate and ingot form under the custody of JPMorgan Chase Bank. The product trades in light volume of around 32,000 shares a day and charges 60 bps in fees per year from investors. The ETF surged about 8.3% in the past 10 days. SPDR Gold Trust ETF (NYSEARCA: GLD ) This is the ultra-popular gold ETF with AUM of $24.3 billion and average daily volume of more than 5.6 million shares a day. This fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio came in at 0.40%. The fund gained 5.8% in the same time period. ETFS Physical Silver Trust ETF (NYSEARCA: SIVR ) This fund has amassed $281 million in its asset base while trades in moderate volume of more than 76,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses and is backed by physical silver under the custody of HSBC Bank USA in London. Expense ratio came in at 0.30%. SIVR was up 5.7%. ETFS Physical Precious Metals Basket Trust ETF (NYSEARCA: GLTR ) For investors seeking the broad precious metal play, GLTR could be the most intriguing option. This fund provides exposure to all four precious metals in the physically backed form. Gold takes the top spot at 58%, followed by 29% in silver while the rest is almost evenly split between platinum and palladium. The product is kept in London or Zurich under the custody of JPMorgan Chase Bank. It has amassed $140 million in its asset base while trades in small volume of about 21,000 shares per day. It charges 60 bps in annual fees from investors and added 5.7% in the same time period. Bottom Line Precious metals create wealth and have been the most exciting investment area especially during times of economic and political turbulence. This is because these have value recognition nearly everywhere in the world and could easily be converted into liquid cash in any currency. The buying pressure has been intense for the precious metals lately and the most recent global economic woes have been extremely favorable for their performances. Additional buying could be in the cards for the space should tensions in China escalate. Link to the original article on Zacks

Ding Dong: Currency Devaluation Plagues Vietnam ETF

2015 marks the fourth year in the past six that the Southeast Asian nation has intentionally weakened the dong. VNM, the lone ETF dedicated to Vietnamese stocks, is down 5.4 percent in the past week, 11.5 percent over the past month. Although VNM is not large in terms of number of holdings (it holds just 30 stocks), the ETF is levered to the Vietnamese export story. By Todd Shriber, ETF Professor China is not the only Asian country that has recently devalued its currency nor are China exchange traded funds the only ones tracking countries in the region that have been slammed by the extreme currency interventions. Vietnam, previously a prolific devaluer of its currency, the dong, is back at it again. In fact, 2015 marks the fourth year in the past six that the Southeast Asian nation has intentionally weakened the dong and was the case following prior instances of dong devaluation , the Market Vectors Vietnam ETF (NYSEARCA: VNM ) is feeling the pain. Ding Dong VNM, the lone ETF dedicated to Vietnamese stocks, is down 5.4 percent in the past week, 11.5 percent over the past month and if the support area the ETF is currently flirting with, a return to the 2013 lows is likely. Not surprisingly, VNM’s lowest levels of 2013 were seen less than 90 days after, a dong devaluation. This time around, market observers see the dong devaluation as a response to China’s similar move. The theory makes sense as a Vietnam is also an export-driven economy and central banks in such economies, particularly in Asia, will take drastic moves to defend their countries’ exporters. “The State Bank of Vietnam (SBV) devalued the dong (VND) by 1 percent against the dollar on Wednesday-its third adjustment so far this year-and simultaneously widened the trading band to 3 percent from 2 percent previously, the second increase in six days,” according to CNBC . Although VNM is not large in terms of number of holdings (it holds just 30 stocks), the ETF is levered to the Vietnamese export story because it allocates over a quarter of its weight to consumer sectors and 44.1 percent to financial services firms, the companies that are lending to other parts of the Vietnamese economy. “Having debuted in August of 2009, the fund recently celebrated its five year anniversary trading live, and as one may expect the underlying index being based on the domestic equity market of Vietnam is not incredibly deep to the limitations of the country still being on the fringe of Frontier/Emerging markets territory,” said Street One Financial Vice President Paul Weisbruch in a recent note. Intended or not, Weisbruch’s comments about Vietnam’s market status are well-timed if not prescient because the country has not been shy about its desire to earn a coveted promotion from frontier to emerging markets status from index provider MSCI. The problems with that promotion are threefold for Vietnam. First, Vietnam is not even on the list of countries MSCI is considering for such an upgrade. Second, it can takes to earn the promotion after being added to the list. Just look at Qatar and United Arab Emirates. Third, Vietnam’s heavy-handed approach to managing its currency is probably not something index providers look favorably upon. Vietnam is currently the ninth-largest country weight in the iShares MSCI Frontier 100 ETF (NYSEARCA: FM ) at a weight of almost 3.5 percent. Home to heavy weights to two OPEC members, Kuwait and Nigeria, and several other major oil producers, FM is off almost 10 percent this year. That is to say further weakness from Vietnamese equities will not be welcomed by this ETF, either. VNM had a P/E ratio of just over 15 at the end of July , which is a slight discount to FM and a noticeable premium to the MSCI Emerging Markets Index. Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

4 Small-Cap ETFs For A Bumpy Japan Ride

Japan has been on an uneven recovery path with wild fluctuations seen in recent quarters. This is especially true as the country lost its momentum yet again, snapping two quarters of expansion. The economy contracted 1.6% year over year in the second quarter compared to a solid 4.5% growth in the first quarter. However, this is slightly better than the market expectation of a 1.8% decline. A drop in consumer spending, weak exports and lower private consumption continued to weigh on the growth of the world’s third-largest economy. The slump in Japan’s biggest trading partner – China – added to the woes. The slowdown seems to be a major setback for Prime Minister Shinzo Abe and his reform policy – Abenomics – which is aimed at pulling the country out of two decades of deflationary pressure and returning to growth. More Stimulus in the Cards? Sluggish growth has raised speculations of additional monetary and fiscal stimulus by the central bank later in the year to boost growth. Earlier this month, Bank of Japan (BoJ) announced that it is seeking expansion in its massive asset purchase at 80 trillion yen per year if lower oil prices continue to hold back inflation at a near-zero level. The bank recently cut its annual growth outlook to 1.7% from 2% and inflation to 0.7% from 0.8% for this year. However, many economists believe that the slowdown in the second quarter was because of temporary factors, mainly the China turmoil, and that the Japanese economy will return to growth in the ongoing quarter. According to Capital Economics, Japan will return to a modest growth in the third quarter and see 1% growth for the full year. Further, as per the survey by the Japan Center for Economic Research, 40 analysts project that growth would rebound by an average 2.5% in the third quarter. This could be easily depicted in the solid manufacturing PMI data, which showed that business activity expanded in July with broad-based improvement in output, new orders, employment and exports. Notably, the PMI index climbed to 51.2 in July from 50.1 in June. Exports recovered in July on cheap yen. This is because Japan is primarily an export-oriented economy and a weaker currency makes its exports more competitive. Rise in exports and hopes of further stimulus measures would boost the stock prices in the coming months. While the rally will likely take place across various market spectrums, small caps will benefit the most, as these are less vulnerable to China’s uncertainty or any other external threat. Below, we take a look at four ETFs, which track the small-cap segment of the Japanese stock market. All of these funds offer access to pint-sized securities in the nation. These are likely to see higher volatility yet deliver better returns if the Japanese economy trends in the right direction. WisdomTree Japan SmallCap Dividend Fund (NYSEARCA: DFJ ) This fund targets the dividend-paying small-cap stocks by tracking the WisdomTree Japan SmallCap Dividend Index. Holding 598 securities in its basket, it has a spread out exposure to various components as each firm holds less than 0.9% of total assets. From a sector look, industrials and consumer discretionary take the top two spots with one-fourth share each, while materials, financials and information technology round off the next three with double-digit allocation each. The product has amassed $335 million in its asset base while trades in a lower volume of under 36,000 shares. It charges an annual fee of 58 bps and has gained about 2.4% over the past three months. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. iShares MSCI Japan Small-Cap ETF (NYSEARCA: SCJ ) This fund follows the MSCI Japan Small Cap Index and holds 798 stocks in its basket. It is widely spread out across components with none holding more than 0.86% of assets. However, about one-fourth of the portfolio is allotted to industrials, closely followed by financials (18.7%) and consumer discretionary (18.2%). The fund has managed AUM of $339 million while sees lower average daily volume of around 38,000 shares. Expense ratio came in at 0.48%. The fund has added 1.7% over the past three months and has a Zacks ETF Rank of 2 with a Medium risk outlook. SPDR Russell/Nomura Small Cap Japan ETF (NYSEARCA: JSC ) This is the illiquid and unpopular ETF in the Japanese space with AUM of $66.3 million and average daily volume of just 3,000 shares per day. It tracks the Russell/Nomura Japan Small Cap Index, charging investors 40 bps in annual fees. In total, the fund holds well-diversified 692 securities in its basket with none accounting for more than 0.61% of assets. Here again, industrials make up for the top sector at 26.1%, closely followed by consumer discretionary (21.3%). The product is up 2.6% over the trailing three-month period and has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree Japan Hedged SmallCap Equity Fund (NASDAQ: DXJS ) DXJS offers exposure to the Japanese small-cap stocks while at the same time provides hedge against any fall in the Japanese yen. This is easily done by tracking the WisdomTree Japan Hedged SmallCap Equity Index. The fund has accumulated $207 million in its asset base and charges 58 bps in fees per year from investors. Volume is moderate as it exchanges 61,000 shares in hand per day on average. The product holds 619 stocks in its basket with none accounting for more than 0.94% of assets. Industrials and consumer discretionary and industrials take the top two spots with at least 24% share each, while materials, finance and information technology round off the top five. The ETF gained 6.7% in the same period. Bottom Line These small cap Japan ETFs hit a new 52-week high last week and are clearly outpacing the broad fund (NYSEARCA: EWJ ). Given the China turmoil and global growth concerns, these funds seem safer choices to play the recovering Japanese economy. Original Post