Tag Archives: nasdaq

How Much Will China Affect Your Portfolio?

When Apple (NASDAQ: AAPL ) reported its fourth quarter earnings earlier this week, Tim Cook, the company’s CEO, noted signs of “economic softness” in the greater China region . Apple’s stock fell by more than 6% the next day. While China wasn’t solely responsible for this decline, it highlights how economic conditions on the other side of the world can affect US investors. How much will China’s financial travails affect your portfolio? You can have direct exposure to China by owning stock in Chinese companies (for example through mutual funds and exchange traded funds). As Apple shows, you can also have indirect exposure to China through companies based in other countries. The iPhone maker gets almost 25% of its revenue from greater China (meaning China, Hong Kong, and Taiwan). Apple is something of an outlier, however; overall only about 2% of large US companies’ revenue comes from China . The Chinese economy can also indirectly have an impact on companies around the world in other ways, such as by affecting commodity prices. So which countries are most closely tied to China? The graph above shows the correlations between the movements of Chinese stocks and many of the world’s other large stock markets during the past three years. Correlation is a statistical measure of how closely two things move together, where a correlation of 1 means they move in lockstep and -1 means they move exactly opposite each other. Other countries in the Asia Pacific region—South Korea, Taiwan, and Australia—have the highest correlations with China. Interestingly Japan, China’s neighbor across the East China Sea, has the lowest correlation of the countries examined. The US is in the middle of the pack. Perhaps the most striking aspect of these correlations, however, is that they’re all fairly closely bunched together. By contrast Chinese stocks have a correlation of only 0.35 with commodities, and a correlation of -0.14 with US investment grade bonds. That’s probably not because Chinese itself has a large effect on all the different countries’ stock markets, but rather that the same factors that affect Chinese stocks (such as the outlook for the global economy) affect stocks all around the globe. So while some particular companies (such as Apple) and some particular countries (such as South Korea) may add some additional “indirect” China exposure to your portfolio, it’s important not to lose sight of the bigger picture. No matter what happens in Chinese markets, your investment performance is likely to be driven more by your broader exposure to different asset classes than by particular companies or countries.

New Energy Fund Seeks To Capitalize On Sector Dislocations

The North American energy landscape is changing rapidly, as the shale boom that led to record production and U.S. inventory levels is being followed by a Middle East oil conflict that is driving oil prices vastly lower. In response, OppenheimerFunds has launched the Oppenheimer SteelPath Panoramic Fund, which is designed to capitalize on the industry tumult with a long-term, value-oriented approach to investing in all “links” in the North American energy value chain. “We are investing in companies that are best positioned to gain long-term advantage from these shifts and deliver relative performance across different commodity price scenarios,” said Brian Watson, CFA and Director of Research at Oppenheimer SteelPath, as well as Senior Portfolio Manager for the fund, in a statement. “Our long-term investment view allows us to benefit from expected dislocations in the evolving global energy market.” Targeting More Volatility, Better Returns Mr. Watson also said he thinks the Oppenheimer SteelPath Panoramic Fund will have more volatility than the firm’s other midstream energy-focused funds, but he also expected it to generate better returns. That’s because the fund attempts to identify value by focusing strictly on small- and mid-cap companies, which tend to be more volatile, over large-cap international oil-and-gas juggernauts. In Mr. Watson’s view, this approach should allow the fund’s investors to best benefit from the “U.S. energy revolution.” “The North American energy landscape has transformed, creating a generational shift in relative competitive advantage as well as new opportunities across the entire energy value chain,” said OppenheimerFunds CIO Krishna Memani. “Brian and his team are using their extensive knowledge of the energy sector to identify durable investment opportunities for our clients.” The energy “value chain” includes: “Upstream” companies that explore for and produce oil, natural gas, and other hydrocarbons; “Midstream” companies that gather, transport, store, distribute, or market energy products; and “Downstream” companies that process, treat, or refine hydrocarbons. Total Return Focus The Oppenheimer SteelPath Panoramic Fund, which went live on November 18 of last year, will invest in all three links of this chain, as well as other energy beneficiaries – chemicals and materials manufacturers, engineering and production companies, etc., – that stand to benefit from energy-related activities. The new fund’s stated objective is to provide total return. Its shares are available in A (MUTF: EESAX ), C (MUTF: EESCX ), R (MUTF: EESRX ), Y (MUTF: EESYX ), and I (MUTF: EESIX ) classes, with respective net-expense ratios of 1.55%, 2.30%, 1.80%, 1.30%, and 1.10%. The minimum initial investment for Class I shares is $5 million – the minimum for all other classes is $1,000. For more information, visit the fund’s web page .