Tag Archives: taiwan

Emerging Markets Back On Track: 5 Outperforming ETFs

Emerging markets, which were the worst hit by slowing economic growth, China turmoil and the prospect of higher interest rates in the U.S., seem to have been rebounding in recent weeks. This is especially true as the two most popular ETFs – the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) and the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ) – climbed over 5% in the past five days against gains of 3.4% for the iShares MSCI ACWI ETF (NASDAQ: ACWI ) and 3% for the SPDR S&P 500 ETF (NYSEARCA: SPY ) , suggesting that the worst might be over. Impressive gains came on the back of stabilization in commodity prices, hopes of additional stimulus from central banks from Asia to Europe, and China’s latest step to arrest the slowdown that led to some gains in emerging market currencies. Additionally, investors’ lack of hope for a rate hike anytime soon fueled the rally in the stocks. Further, data from the Institute of International Finance, which showed that capital flows into emerging markets turned flat in February after seven straight months of outflows, injected fresh optimism into the emerging markets. Notably, net emerging market outflows decreased to $200 million last month, with Latin America pulling in the maximum capital of $2.7 billion, followed by inflows of $1.7 billion in Africa and the Middle East, $1.5 billion in Europe and $300 million in Asia. Apart from positive developments, low valuations made these stocks tempting. As a result, several emerging market ETFs performed remarkably well over the past five days. Of those, we have highlighted the ones that emerged as the true winners of this short-covering rally. PowerShares FTSE RAFI Emerging Markets Portfolio ETF (NYSEARCA: PXH ) – Up 6.4% This ETF follows the FTSE RAFI Emerging Markets Index and offers exposure to the largest emerging market stocks based on four fundamental measures – book value, cash flow, sales and dividends. Holding 336 securities in its basket, the fund allocates no more than 3.4% in a single security. Financials (31%) and energy (22.6%) take the top two spots. In terms of country holdings, about one-fourth of the portfolio goes to Chinese firms while Taiwan, Brazil, and Russia round off the next three spots with a double-digit exposure each. The fund has amassed $282.1 million in its asset base, and trades in a good volume of around 265,000 shares a day. It charges 49 bps in annual fees from investors and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares MSCI BRIC ETF (NYSEARCA: BKF ) – Up 5.7% This fund targets the four BRIC countries with highest exposure of 57.1% in China, 19.6% in India, 13.7% in Brazil and the rest in Russia. It tracks the MSCI BRIC Index and holds 308 stocks in its portfolio. However, it is skewed towards the top firm – Tencent Holdings ( OTCPK:TCEHY ) – at 6.82%. Other firms hold no more than 4.84% of assets. In terms of sector exposure, financials dominates the fund return with 30% of the portfolio, followed by information technology (18.4%) and energy (12.4%). The fund has accumulated $154.9 million in AUM and trades at a lower volume of 21,000 shares per day on average. It charges 72 bps in expense ratio and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a Medium risk outlook. EGShares Emerging Market Consumer ETF (NYSEARCA: ECON ) – Up 5.5% This ETF targets the consumer sector of the emerging markets by tracking the Dow Jones Emerging Markets Consumer Titans 30 Index. It holds 30 stocks in its basket with heavy concentration on the top firm – Naspers ( OTCPK:NPSNY ) – at 10.3%. The other firms hold less than 5.7% share. From a country look, South Africa occupies the top position with one-fourth of the portfolio while China and Mexico round off the top three with over 16% share. The fund has amassed $549.6 million in its asset base and sees solid average trading volume of more than 352,000 shares. The expense ratio comes in at 0.83%. Schwab Emerging Markets ETF (NYSEARCA: SCHE ) – Up 5.5% This fund tracks the FTSE Emerging Index, holding 776 stocks in its basket. None of the securities accounts for more than 4% of total assets. The product is slightly tilted towards financials at 25%, closely followed by technology (14%) and energy (8%). Here again, China takes the top spot at 26.5% while Taiwan and India receive a double-digit allocation each. SCHE is one of the popular and liquid options in the emerging market space with AUM of $1.5 billion and average daily volume of 848,000 shares. It charges 14 bps in fees per year from investors and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. First Trust Emerging Markets Small Cap AlphaDEX ETF (NYSEARCA: FEMS ) – Up 5.5% This fund follows the NASDAQ AlphaDEX Emerging Markets Small Cap Index and targets the small cap segment of the emerging market space. Holding 206 securities, the fund is well spread out across each component as each security holds less than 1.5% share. Taiwanese firms take the top spot at nearly 24.2%, closely followed by China (18.2%) and Brazil (12.4%). From a sector look, about one-fifth of the portfolio is allocated to information technology while financials, industrials, and consumer discretionary round off the next three spots with a double-digit allocation each. The product is often overlooked by investors, as depicted by AUM of $36.3 million and average daily volume of roughly 22,000 shares. The expense ratio comes in higher at 0.80%. Original Post

Indonesia Slashes Rates Again: ETFs In Focus

Indonesia’s central bank cut its benchmark interest rate for the second time this year in its efforts to improve sluggish economic growth. Bank Indonesia (BI) slashed its benchmark interest rate by 25 basis points to 7%. BI had undertaken a similar sized cut in January after keeping rates unchanged for the last 10 months of 2015. The recent rate cut was largely expected as the majority of economists surveyed by Reuters had predicted that BI would cut the key rate by 25 basis points. In its efforts to ease the economy, BI not only lowered interest rates but also reduced the reserve requirement on rupiah deposits by 1 percentage point to 6.5%, effective from March 16. This move is expected to boost liquidity by more than $2.5 billion (34 trillion rupiah). These measures from the Indonesian central bank come closely on the heels of the U.S. Federal Reserve taking a dovish stance with hopes of further rate hikes fading. The Indonesian bank stated that its measures to ease monetary policy are aimed at achieving solid macroeconomic stability with reduced inflationary pressure against a backdrop of uncertain global markets. It further pointed out that it will continue to work with the government to control inflation, stimulate domestic economic growth and bring about structural reforms. The Indonesian president, Joko Widodo, popularly known as “Jokowi” has been quite vocal about his wish to see interest rates fall further to spur growth. As per a Bloomberg report, Indonesia’s economy expanded just 4.79% last year, the lowest since 2009. This year, with inflation under control, the overall sentiment is that the rates could be slashed further. In 2016, BI expects inflation to be around the mid-point of its target range of 3% to 5%. Apart from Indonesia, several other countries are also following the strategy of monetary easing, which generally comes in the form of an interest rate cut, to boost growth. Earlier this year, Bank of Japan’s (BOJ) move to impose a negative interest rate for the first time surprised the markets. The BOJ Governor Haruhiko even stated that there will be no limit to efforts for easing monetary policy. The central bank may further expand asset purchases if required. Other Asian countries including Taiwan and Bangladesh have cut rates. Meanwhile, the European Central Bank (ECB) has also hinted on further policy easing in its March 2016 meeting. Investor sentiment towards Indonesia has improved following its liberalization developments by easing restrictions on foreign investment in several industries including films, restaurants and healthcare earlier this month. Jokowi’s move to deregulate the traditionally protectionist economy should help in accelerating growth and making the Indonesian business environment more conducive for new investment. A Closer Look at 3 Indonesian ETFs In the light of these developments, we highlight three ETFs – the iShares MSCI Indonesia ETF (NYSEARCA: EIDO ) , the Market Vectors Indonesia Index ETF (NYSEARCA: IDX ) and the Market Vectors Indonesia Small-Cap ETF (NYSEARCA: IDXJ ) – that have gained 6.2%, 7.2% and 6.2%, respectively, in the last 10 days. All three have a Zacks ETF Rank of 3 or a ‘Hold’ rating with a High risk outlook. EIDO This is the most popular ETF tracking the Indonesian market with AUM of $344.3 million and average daily volume of almost 756,000 shares. The fund tracks the MSCI Indonesia Investable Market Index, holding 86 securities in its basket while charging 62 bps in annual fees from investors. The product is somewhat concentrated in both sectors and securities. The top five firms account for almost half of total assets, while from a sector point of view, financials dominates the fund’s assets with 38% share. The fund has a heavy tilt towards large-cap stocks at 84%. IDX This ETF follows the Market Vectors Indonesia Index, holding a basket of about 45 companies that are based or do most of their business in Indonesia. The product puts about 54.6% of total assets in the top 10 holdings, suggesting moderate concentration. Large caps are pretty prevalent, as these make up 83% of assets. With respect to sector holdings, financials again takes the largest share at 34.9%, followed by consumer staples (18%) and consumer discretionary (14.4%). The product has amassed $98.1 million in its asset base while it trades in volumes of around 89,000 shares. It charges 58 bps in fees per year from investors. IDXJ Unlike the other two, this is a small-cap centric fund. It is unpopular and less liquid having AUM of $5.3 million and average daily volume of about 2,000 shares. The fund tracks the Market Vectors Indonesia Small Cap Index and charges 61 bps in annual fees. Holding 29 stocks, the product does a decent job of spreading out as the top 10 securities hold about 62% weight. However, it is a bit concentrated from a sector outlook, as financials takes the top spot at 42.1% while industrials and energy round off the next two positions at 23% and 14.7%, respectively. Original Post

ETFs In Focus With Continued Emerging Market Asset Outflow

Emerging markets have been struggling for quite some time now. China’s economic problems are at the heart of the emerging markets’ woes. This along with weak emerging market currencies, a strong U.S. dollar and falling oil prices have resulted in a massive sell-off in emerging market stocks for quite some time now. Last week was particularly disastrous for emerging market ETFs as outflows from these funds were approximately $1.17 billion, according to data put together by Bloomberg . Last week’s outflow along with outflow of $2.12 billion in the week before that brings total outflow till January third week to $3.9 billion. Outflows of this magnitude have not been witnessed since August 2015. As per etf.com, iShares MSCI Emerging Markets (NYSEARCA: EEM ) alone recorded net outflows of approximately $1.4 billion in the week ended January 22. According to Bloomberg, China and Hong Kong witnessed the biggest outflow, primarily from stock funds. Withdrawal from China and Hong Kong funds reached $328.1 million last week, compared with redemptions of $146.8 million in the previous week. After a series of downbeat data flows from China, investors are now skeptical of the country’s ability to deliver above-par growth numbers. Meanwhile, the recent currency devaluation has not helped its case. While it can be argued that a weaker currency may help strengthen China’s sagging economy given its high exports, the popularity of dollar-denominated debt among domestic companies in China will make it more expensive to service the obligations. These factors are encouraging investors to flee from China in order to avoid further losses. Taiwan experienced the second biggest outflow, all from stock funds. Investors pulled back $185.1 million from this country’s ETFs last week, piling upon the $302.8 million witnessed in the previous week. As the Taiwanese economy thrives on exports, investors could be exiting the market on fears of it losing out to China on currency competitiveness. Below we highlight three broader emerging market ETFs that have considerable exposure in China and Taiwan. These ETFs are expected to remain in focus if outflows from emerging markets continue in the coming days. BLDRS Emerging Markets 50 ADR ETF (NASDAQ: ADRE ) – 43% weight in China This ETF tracks the BNY Emerging Markets 50 ADR Index, which is capitalization-weighted and comprises approximately 50 emerging market-based depositary receipts. The fund has the highest exposure to China (43%), followed by Taiwan (14.5%). It has amassed roughly $108.6 million in its asset base while it trades in a volume of roughly 15,459 shares a day. It charges 30 bps in fees from investors per year and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. SPDR S&P Emerging Asia Pacific ETF (NYSEARCA: GMF ) – 44.5% weight in China This ETF follows the S&P Asia Pacific Emerging BMI Index and offers exposure to the emerging economies of the region. It is a large cap centric fund, with the top two sectors – financials and information technology – collectively accounting for more than half of the portfolio. From a country look, the Chinese firms dominate the portfolio at 44.5%, followed by Taiwan (20.4%) and India (18.3%). The ETF has amassed $347.4 million in its asset base with average daily volume of 86,146. It charges 49 bps in annual fees. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. SPDR S&P Emerging Markets Dividend ETF (NYSEARCA: EDIV ) – 29% weight in Taiwan This ETF provides exposure to the stocks from emerging market countries that offer high dividend yields by tracking the S&P Emerging Markets Dividend Opportunities Index. Taiwan accounts for 29% of the portfolio while South Africa and Brazil round off the next two countries with double-digit allocation each. It has accumulated $204.7 million in its assets base and trades in average daily volume of roughly 123,646 shares. It charges 49 bps in fees per year and carries a Zacks Rank #3 with a Medium risk outlook. Original Post