ETF XRAY

Australian ETF Up on Takeover Rumors

By Carl Delfeld of the Chartwell ETF Advisors

News of a possible takeover for Rio Tinto from Australian rival BHP Billiton has helped the Australian ETF (EWA) get off to a postive note on Thursday morning. Rio Tinto and BHP are two of the top holdings in the Australian ETF basket.

Rio surged 16.7% after BHP confirmed it had sent a letter to the Rio board to discuss a possible merger, but the approach was rejected. BHP rose 6.4%. The news of a possible mega-merger in the mining sector kickstarted hopes for further deals, sending mining stocks sharply higher across the board.

The Australian ETF (EWA) has also benefited from being at the sweet spot of the commodity and Asian trading theme. BHP, the company with the largest weighting in the ETF basket, recently reported huge new exploration opportunities. Mr. Marius Kloppers will soon occupy the CEO chair so capably executed by Chip Goodyear. The talented management team of BHP should continue to drive growth in a conservative manner without costs getting out of hand.

The Australian ETF has been a consistent performer as part of Chartwell ETF's model portfolios and was added to its Asian Opportunity portfolio yesterday.

Strong Currency and BHP Drive Australian ETF (EWA)

By Carl Delfeld of the Chartwell ETF Advisor

The Australian exchange-traded fund (EWA) has rebounded sharply aided by the resilient Aussie dollar reaching new highs and steady performances by companies like BHP up 2.9% so far in today's trading. EWA is up 1.9% in mid-day trading today.

The Australian dollar reached its strongest level against the US dollar in nearly a quarter of a century on Monday, some commentators predicting it could reach parity in the coming months. Part of the demand for the currency is the carry trade whereby investors borrow in low interest currencies like the Japanese yen and invest in higher yielding currencies like the Aussie and New Zealand dollar.

According to the Financial Times, the Aussie jumped yesterday by more than one US cent, passing through the 90 US cent barrier to reach in Sydney at $0.9016, its highest level in 23 years. Yesterday’s rise marks an extraordinary run for the Aussie, which dipped to $0.77 in August on subprime fears. It also hit a 10-year high against sterling yesterday.

The Australian ETF (EWA) has also benefited from being at the sweet spot of the commodity and Asian trading theme. BHP, the company with the largest weighting in the ETF basket, recently reported huge new exploration opportunities. Mr. Marius Kloppers will soon occupy the CEO chair so capably executed by Chip Goodyear. The talented management team of BHP should continue to drive growth in a conservative manner without costs getting out of hand.

The Australian ETF (EWA) has been a key holding in several of Chartwell ETF's portfolios.

Australian Politics, Rates and ETF

The Australian exchange-traded fund (EWA) has unfortumately given back a good share of its year-to-date gains. It is off 8% from its July high.

The Reserve Bank of Australia’s decision to lift its benchmark interest rate to an 11-year high of 6.5 per cent will not help matters much but should shore up the Aussie dollar. The increase comes at a sensitive time for John Howard, prime minister, whose ruling centre-right coalition trails the opposition Labor party. Is it good politics to raise rates in the middle of an election fight?

Maybe not. A newspaper poll this week published in the Financial Times found support for Labor had risen to 56 per cent against the ruling Liberal/National coalition’s 44 per cent. Australians and the Australian economy are inordinately sensitive to interest rates. Home ownership, at close to 70 per cent, is high by world standards and variable home loans are common. Australians also have high levels of personal debt. There have been five interest rate hikes since the last election in 2004 and the opposition will surely use this as a tool to call for change.

Another issue is that corporate profits have lagged stock performance and some question how long multiple expansion can move the market. One silver lining is that Australia's compulsory pension prgram accounts for almost 2/3 of the markets $1.6 trillion market value. On the other hand, financial and energy/resource stocks account for a remarkable 60% of the market - a number similar to that in Canada.

The Australian ETF (EWA) is led by BHP Billiton which believe it or not has a market value larger than that of Coca-Cola. BHP underscores Australia's strength as a resourse rich country. Australia is:

a leading supplier of core steelmaking raw materials
the world’s second largest copper producer
the world’s second largest exporter of energy coal
the world’s third largest producer of nickel metal
the world’s fourth largest producer of uranium
the world’s sixth largest producer of primary aluminium,
and a significant producer of oil and gas

By Carl Delfeld of the Chartwell ETF Advisor

Australian Dollar and ETF Up

The Australian exchange-traded fund (EWA) has shrugged off worries about an overheated real estate market and higher interest rates to gain 17.7% so far this year. Consumer spending and confidence remain firm as strong data from the retail sector reignited speculation of further interest rate rises coupled with budget plans to cut taxes and increase spending. The Australian dollar responded by strengthening against the US dollar. The Australian dollar climbed 0.5 per cent to $0.8285 against its US counterpart.

Peter Ganrham of the FT speculates that this trend will continue with data revealing that Australian retail sales rose a surprising 1.1 per cent in March – double the rate expected leading to pressure for more interest rate hikes and speculation that the US Fed may leave rates unchanged this week.

The Australian stock market and economy is on a historic run as it enjoys being on the sweetspot of Asian growth, commodity boom and market reforms. The confidence and momentum provided by the Australian consumer may continue to propel the market forward though at some point rate hikes could slow growth.

By Carl Delfeld of the Chartwell ETF Advisor

iShares MSCI Australia Index (EWA) Overveiw

iShares MSCI Australia Index (EWA) The green shaded area shows the trading range so far this year for 100 shares of EWA. In January this Australia ETF position reversed into a column of O’s loosing nearly 9%. 47% of EWA assets are in financials, and 23% in materials. The top position with 11.16% goes to BHP Billiton the world's largest diversified resources company.

DE Smith of MyPortfolioView.com

ETF Surfs Up Down Under

The lucky country’s economy is on a record-breaking 14 year roll and the ETF (EWA) that tracks its market is not doing badly either. The question is: will it continue?  Just imagine, from a few convicts dropped ashore in 1788, Australia has developed into a first class global economy.  The reforms enacted by former Prime Minister Bob Hawke and Treasurer Paul Keating during the 1980’s set the stage for a remarkable run of prosperity. Specifically, they slashed import tariffs, floated the currency and reduced the power of big labor. The current Prime Minister, John Howard who has been elected for times, has continued and expanded these reforms riding a wave of economic growth – 14 years of uninterrupted 4-5% growth. The national debt has virtually been eliminated, the currency strong, the government recently signed a free–trade pact with America and is starting to negotiate a pact with China. Australia received $52 billion in foreign direct investment in 2006.

This is all great news and our portfolio allocation to the Australia iShare (EWA) has done very well with a 105% gain over the past two years. The Australian iShare was up over 20% last year and provides investors with exposure to about 60% of the total stock market.

BHP Billiton is this ETFs largest holding and is earning record profits.

• A leading supplier of core steelmaking raw materials
• World’s second largest copper producer
• World’s second largest exporter of energy coal
• World’s third largest producer of nickel metal
• World’s fourth largest producer of uranium
• World’s sixth largest producer of primary aluminium
• A significant producer of oil and gas

BHP also has substantial interests in diamonds, silver and titanium minerals.

Pacific Ex-Japan ETF (EPP) Top Holding XRAY

According to the most recent data BHP Billiton makes up 7.39% of the iShares MSCI-Pacific Ex-Japan ETF [EPP]. Below is a summary of their business from their own website.

Global Operations

With some 38,000 employees working in more than 100 operations in approximately 25 countries, which together underpin our strategic focus of:

• A world class diversified asset base
• Stable and increasing cashflow
• Cost savings and operational efficiencies to provide strong returns and margins
• A range of premium growth options
• A committed and engaged workforce
• An overriding commitment to sustainable development

Their Business

• A leading supplier of core steelmaking raw materials
• World’s second largest copper producer
• World’s second largest exporter of energy coal
• World’s third largest producer of nickel metal
• World’s fourth largest producer of uranium
• World’s sixth largest producer of primary aluminium
• A significant producer of oil and gas

They also have substantial interests in diamonds, silver and titanium minerals.