ETF XRAY

State Street Global Advisors June ETF Update

By Carl Delfeld of Chartwell ETF

State Street Global Advisors came out with their June ETF update and, as of July 1st, there were 740 ETFs in the US with assets totaling approximately $593 billion managed by 25 ETF managers. ETF industry assets rose $5.7 billion for the month, or 1.0% and 12 new ETFs were launched in June.

Eight of the twelve categories gained assets. The Fixed Income category gained the most in absolute terms, rising $3.8 billion. The International category was the biggest loser, falling $1.5 billion, or 1.1%.

Overall, assets were down 0.1%. The Micro Cap category rose $41MM, or 13.3%. Allcap Value led declines falling $18.2MM, or 5.3%.

Consumer Staples led overall gains in percentage terms rising $667.9 billion, or 20.4%. Although falling 11.0% in June, assets in Materials are up 56.2% YTD.

The top three managers in the US ETF marketplace were: Barclays Global Investors (BGI), State Street Global Advisors (State Street), and Vanguard. Collectively, they accounted for approximately 83.5% of the US-listed ETF market. Average Daily Volume fell from an average of $74.8 billion to $64.4 billion.

The top three US ETFs in terms of dollar volume traded for the month were the SPDR® S&P 500® [SPY], PowerShares QQQ [QQQQ], and iShares Russell 2000 [IWM].

The top three US ETFs in terms of assets were: the SPDR® S&P 500® [SPY], SPDR® Gold Shares [GLD], and iShares MSCI EAFE® [EFA].

In terms of performance,  Small Cap, Large Cap, and Total Market indices rose; only Mid Cap fell for the month. Six of ten sectors had positive returns. Utilities and Information Technology were by far the best performers. Information Technology has gained nearly 25% YTD.

 

 

 

Japan (EWJ) Continues Weakness

By Carl Delfeld of Chartwell ETF

Japan has notched up five sequential quarters of decline. This is due to more than slipping demand from overseas. Orders from manufacturers, which tend to focus on exports, rose in May from the previous month. By contrast, orders from sectors such as construction and telecommunications which are a good proxy for domestic demand, fell 7 percent. This suggests continued significant excess capacity, the culprit of Japan’s economic dilemma. The world’s second-biggest economy has an output gap, on the government’s reckoning, in excess of 8 percent.

Light order books are a reflection of weak capital expenditure plans, as recently highlighted in Japan’s quarterly Tankan survey of business sentiment Government spending cannot fill the gap given Japan’s huge debt burden equal to 185% of GDP. Public sector orders dropped 11 percent month on month in May, although this followed a 22 percent increase in April.

Japanese equity markets and (EWJ) had fallen by midweek six consecutive days. Japanese loan growth is also decelerating, in part as companies and households grow more reluctant to borrow and spend. Corporate bankruptcies, meanwhile, continue to soar: more than 1,400 companies went bust last month, up 7 percent from a year ago.

 

Chartwell ETF Pick of the Week

By Carl Delfeld of Chartwell ETF

WisdomTree Dreyfus Emerging Market Currency (CEW)

Rationale and Overview:

This brand new emerging market currency ETF offers investors the opportunity to gain access to emerging market currencies such as Brazil, Chile, China, the Czech Republic, Hungary, India, Israel, Malaysia, Mexico, Poland, Russia, Singapore, South Africa, South Korea, Taiwan, Turkey, and Thailand.

Diversification into these emerging market currencies has the potential of helping your global portfolio in a number of areas, principally, higher yields, stronger economic growth leading to chances for appreciation, and exposure to non-correlated assets that will likely move opposite or contrary to equities and other asset classes. 

Emerging market equities react to factors independent of those factors that drive currency returns, often contributing to significantly higher volatility. Over the last 10 years, an equally weighted basket of emerging currencies had an annualized volatility of 6.9%, while an equally weighted basket of emerging market stocks from the same countries had a volatility of 25.2%.

Emerging economies often offer higher yields to compensate investors for these risks. The chart below uses global one-month deposit rates to present a range of yield opportunities available to U.S. investors in certain emerging and developed markets. The bar labeled “Emerging Basket” shows an average of the emerging market currencies shown. As of March 31, 2009, the average rate on the Emerging Basket was 3.6 percentage points higher than deposit rates on the euro and 4.2 percentage points higher than similar short-term rates in the U.S.

Catalyst: Emerging market equities have had a good run and the time is right to lighten up a bit by including some currency exposure. Investors are also looking for higher income and plays on a weaker US dollar.

Tip: Keep CEW as one your currency plays along with the Canadian (FXC) and Australian (FXA) dollar.

Risk Factor:
The risk factor is medium and I suggest an 8-10% trailing stop loss.

To receive Chartwell ETF's Pick of the Week every week plus updates on global markets and an ETF Focus List, please go to Chartwell ETF today.

Indonesia (IF) a Strong Performer

By Carl Delfeld of Chartwell ETF

Indonesia (IF) has been one of this year’s top performers. Indonesian President Susilo Bambang Yudhoyono outlined yesterday his domestic agenda for the next five years, predicting that if re-elected later this year Indonesia would record 7 per cent annual economic growth by 2014.

Analysts are paying close attention to Mr Yudhoyono’s forecasts because he is widely expected to defeat his two rivals in presidential elections to take place in July. Current polls suggest Mr Yudhoyono, whose Democrat Party won the most votes in April’s parliamentary election, will win comfortably in one round but experts believe his lead will narrow once the formal campaign begins next week.

Indonesia last experienced 7 percent economic growth in 1996, during the era of the dictator Suharto and before the 1997/98 Asian financial crisis. Growth last year was 6.1 per cent and 4.4 per cent in the first quarter of this year. Analyst forecasts for 2009 range from around 2 per cent to 4.5 per cent. The Asian Development Bank approved on Wednesday a $1bn standby loan to Indonesia, as the country puts together a $5.5bn  package to bolster its ability to navigate the global financial crisis.

The loan came as Bank Indonesia, the central bank, cut its benchmark rate by 25 basis points to a four-year low of 7 per cent to stimulate growth after inflation reached a 17-month low of 6.04 per cent, year-on-year, in May.

Receive more information on Indonesia and Asian and emerging markets by going to Chartwell ETF.

Top Ten Global ETFs

By Carl Delfeld of Chartwell ETF

Hundreds of international and global ETFs are listed on the exchanges. However not all of them are able to attract significant amount of assets. The following are the top 10 global ETFs by Total Net Assets:

iShares MSCI Emerging Markets Index (EEM)

iShares MSCI EAFE Index (EFA)

iShares FTSE/Xinhua China 25 Index (FXI)

Vanguard Emerging Markets Stock ETF (VWO)

iShares MSCI Brazil Index (EWZ)

iShares MSCI Japan Index (EWJ)

Vanguard Europe Pacific ETF (VEA)

Vanguard FTSE All-World ex-US ETF (VEU)

iShares MSCI Taiwan Index (EWT)

iShares MSCI Pacific ex-Japan (EPP)

EEM and EFA have assets of $30.7B and $30.2 B respectively as of June 19,2009 making them the largest two international ETFs. Nearly half of the top 10 ETFs are related to emerging markets. This shows that investors are betting heavily on emerging markets this year. EEM, the largest emerging market ETF is also one of the largest traded ETF in the NYSE on a daily basis.

Overall, EPFR Global-tracked equity funds posted inflows of $508 million for the week as flows into emerging markets and Global Equity Funds offset modest outflows from US, Japan and Europe Equity ETFs and Funds.