Tag Archives: stocks

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.

Antisocial: Twitter Undercuts IPO, Facebook Sells Off

It’s not something that Twitter (TWTR) would want to tweet: Its stock on Thursday closed at 26, the same as its IPO price 21 months ago. Twitter stock, which hit an intraday low of 25.92, was down 5.8% for the day. It was a rough day for social networking stocks in general. Facebook (FB) stock fell 5% to 90.56. But unlike Twitter, Facebook has a lot to brag about. Facebook, currently an IBD Leaderboard stock, has been on an upward climb for the

Seeking Diversification – Top 3 ETFs

Summary Most efficient diversifiers tend to have a ‘spin’ to traditional funds. They also demonstrate low correlation and beta with S&P 500. Volatility can be a positive factor in portfolio diversification context. In 1952 Noble Prize winner Harry Markowitz described diversification as the only ‘free lunch’ when seeking investment returns. Most investors are well familiar with the concept of diversification but it is not always easy to find securities that would fit your portfolio well from the risk perspective. Ever since I launched a freely available investor tool InvestSpy almost a couple of years ago, I have tested countless portfolios and individual securities searching for efficient diversifiers. In this article I would like to share top 3 equity ETFs that make the most frequent appearances on my results table. No. 3 – ALPS Alerian MLP ETF (NYSEARCA: AMLP ) AMLP provides exposure to the overall performance of the U.S. energy infrastructure Master Limited Partnership (MLP) asset class. MLPs are publicly traded partnerships engaged in pipeline transportation, storage and processing of energy commodities. Other closely related products: JPMorgan Alerian MLP Index ETN (NYSEARCA: AMJ ), UBS ETRACS Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPI ) No. 2 – PowerShares Preferred Portfolio ETF (NYSEARCA: PGX ) PGX invests in fixed rate preferred stocks issued in the U.S. domestic market. Preferred stockholders are generally entitled to a fixed dividend rate that is subordinate to debt but senior to dividends on common stock. Other closely related products: iShares U.S. Preferred Stock ETF (NYSEARCA: PFF ), PowerShares Financial Preferred Portfolio ETF (NYSEARCA: PGF ) No. 1 – Market Vectors Gold Miners ETF (NYSEARCA: GDX ) GDX offers exposure to publicly traded companies worldwide involved primarily in gold mining, representing a diversified blend of small-, mid- and large- capitalization stocks. Other closely related products: Market Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ ) It is important to note that all of these three funds have a ‘spin’ to more traditional equity ETFs. GDX acts a combination of stocks and gold, PGX sits somewhere between stocks and bonds, whilst AMLP is linked to all three major asset classes. Two common risk characteristics that all three above-mentioned funds share are low correlation and low beta vs S&P 500. Coefficient values are amongst the lowest of all available equity ETFs and can be compared here . Therefore, GDX, PGX and AMLP will almost certainly have risk contribution below their dollar weighting given that most traditional portfolios are dominated by the risk arising from the equities component as outlined in one of my previous articles . Although GDX is clear leader in terms of correlation and beta, this is not the only reason that takes it to the No. 1 spot. Whilst AMLP and PGX demonstrate relatively subdued volatility, GDX is a beast in this respect. And volatility can be a good thing in this context as demonstrated by Salient Partners in the whitepaper where they argue that higher volatility diversifiers are amongst the most powerful tools an investor has. By no means am I saying that an investor should blindfoldedly invest in these ETFs purely because they look attractive from the portfolio diversification standpoint – after all, GDX and AMLP are currently both on a terrible run. The investment decision should be made in conjunction with other factors that are part of your analytical process, for instance incorporating trend following indicators or fundamental ratios. However, these are definitely the funds that one should at least keep an eye on. If risk can be reduced without sacrificing return, this is what free lunch in the markets is. Bon appetite! Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PFF over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.