ETF XRAY

Chartwell Offers Luxury Investment Tour of Singapore, Malaysia and Thailand

Chartwell Partners Asset Management is offering global investors a luxury investment tour of Singapore, Malaysia and Thailand. While five years ago, many analysts believed that Southeast Asian markets would be in trouble due to intense competition from China, the region has thrived and offers investors a great play on Asian growth. The tour is called "Investing Along the Orient Express" because it includes a journey from Singapore to Bangkok aboard the historic Eastern & Oriental Express.

The goal of the trip is to learn more about investing in this dynamic region together with enjoying its fascinating culture and sites. Chartwell Managing Director Carl Delfeld stated that he planned the tour in response to many requests at investment conferences. "After I would speak about global investing opportunities and strategies, there would always be several investors asking if they could travel with me to learn first hand about places like Southeast Asia. Now they have the chance."

Debbie O'Brien-Director of Sales, Orient-Express Hotels, Trains & Cruises noted that "they look forward to the Chartwell investor group joining the Eastern & Oriental Express as part of this creative and memorable tour of Singapore, Malaysia and Thailand. From the exciting mix of Chinese, Indian and Malay architecture and cuisine in Singapore to the glittering Thai temples of Bangkok, this journey embraces the great cultures, spiritual tranquility and mystery for which South East Asia is renowned. Welcome aboard!!"

The investment tour will be from January 26th through February 2nd 2009 and will begin with three days in Singapore at the Raffles Hotel. After interesting economic, company, and regional investment briefings from experts plus a visit to places like the Singapore Stock Exchange during the mornings, enjoy flexible touring options such as cruises, sightseeing or sporting activities in the afternoons and evenings. One morning will be dedicated to Malaysia and Indonesia, which have been steady performers.

On the fourth day, the Eastern & Oriental Express departs Singapore's Keppel Road station in the morning. Having been welcomed onboard the gleaming carriages, settle into your luxury cabin and, if you wish, meet interesting people from all over the world. Enjoy the passing scenery as the train crosses to Malaysia via the causeway of the Straits of Johor. Lunch is served in one of the opulent dining cars. Dress for dinner and then spend a relaxing evening in the Bar Car in the company of our resident pianist.

During the evening, the E&O arrives at Kuala Lumpur's magnificent Moorish-style station where we will pause before departing for our overnight journey towards Bangkok with side trips to the island of Penang and the River Kwai. Our home for three days in Bangkok will be the prestigious Oriental where the morning briefings and investment activities will center on Thailand and Vietnam.

Your guide for "Investing Along the Orient Express" is Carl Delfeld. In addition to being Managing Director of Chartwell Partners, Carl is a columnist at Forbes Asia, was a U.S. Representative to the Asian Development Bank, a U.S. Treasury consultant, global strategist for New England Research & Management and author of three books about global investing.

For further information and a brochure with pricing, please call 719.264.1503. This investment tour is limited to 25 investors so secure your reservation at your earliest convenience.

Chartwell Introduces Emerging Market ETFfolio

Chartwell Partners Asset Management has launched another folio, called the Emerging Markets ETFfolio. The Emerging Markets ETFfolio is managed by Chartwell on FOLIOfn's online brokerage platform.

Emerging markets such as China, India, Russia and Brazil have attracted considerable media attention over the past several years due to both their rapid economic growth and booming stock markets, but the risks to investing in these markets is also significant.

"Financial information on specific emerging market companies is not always provided on a timely and reliable basis, so investing in a basket of securities through exchange-traded funds makes sense," according to Chartwell Managing Director Carl Delfeld.

Delfeld also believes that a diversified ETF folio blending a variety of emerging market countries is a better approach than concentrating on just India and China. For example, Delfeld suggests that countries such as Malaysia, Taiwan and Thailand offer investors an "indirect play on Chinese and Asian growth." The Emerging Markets ETFfolio may also provide investors limited exposure to difficult-to-get-at markets such as smaller emerging market companies and frontier markets.

In selecting and weighting emerging market ETFs for the Emerging Markets ETFfolio, Chartwell considers relative valuations, momentum, macro economic factors and even political developments. Delfeld believes that "chasing momentum without considering value and other important factors is usually a losing strategy over time."

Delfeld explained that FOLIOfn was the ideal platform for managing the Emerging Markets ETFfolio since it "offers the ability to buy and sell in fractional shares and allows for the rebalancing of the folio in a single low cost transaction."

Greg Vigrass, President of FOLIOfn Institutional, commented: "Using FOLIOfn's Institutional platform, Chartwell is able to actualize the entire investment process, including their portfolio construction and distribution, as well as the ongoing management associated with their offer. We are very pleased to provide the venue by which Carl Delfeld can make these innovative investment offerings to the public."

The Emerging Markets ETFfolio will join the other ETFfolios that are available to investors and investment advisors through Chartwell Partners on the FOLIOfn platform. These include the:

Core Conservative ETFfolio
Fixed Income ETFfolio
Global Dividend/Income ETFfolio
World Economic Freedom ETFfolio
Country Rotation ETFfolio
Country Rotation Momentum ETFfolio
Country Rotation Value ETFfolio
Global Sector Rotation ETFfolio
Global Growth ETFfolio
Emerging Markets ETFfolio
Asia-Pacific ETFfolio
China Strategy ETFfolio
Global Long/Short Strategy ETFfolio

Chartwell uses these folios as building blocks to develop custom global portfolios using a core/satellite strategy. Delfeld was a U.S. Representative to the Asian Development Bank and a consultant to the U.S. Treasury. He is a columnist for Forbes Asia, editor of ChartwellETF.com and author of "Think Global, Grow Rich," "The New Global Investor" and "ETF Investing Around the World."

For more information and media inquiries, contact Carl Delfeld at 719.264.1503.

Potential Frontier ETFs?

By Carl Delfeld of the Chartwell ETF Advisor

I am always getting calls from investors wondering when there will be an exchange-traded fund for markets like Nairobi, Vietnam, Mongolia, Jordan or Kuwait. Regulatory hurdles are one issue and another is the liquidity and company concentration in particular markets.

To put things into perspective, here is some data on overseas stock markets courtesy of Portfolio magazine.

London Stock Exchange
Opened in 1801
3,301 listed companies
$4 trillion market cap

Tokyo Stock Exchange
Opened in 1878
2,422 listed companies
$4.7 trillion market cap

Kuwait Stock Exchange
Opened in 1963
190 listed companies
$106 billion market cap

Nairobi Stock Exchange
Opened in 1954
58 listed companies
$10.7 billion market cap

Tehran Stock Exchange
Opened in 1967
332 listed companies
$32 billion market cap

Hong Kong Stock Exchange
Opened in 1914
1,206 listed companies
$2.2 trillion market cap

Kathmandu Stock Exchange
Opened in 1994
134 listed companies
$2.8 billion market cap

New York Stock Exchange
Opened in 1792
3,617 listed companies
$16.2 trillion market cap

But I think I know what is driving the phone calls. The Kuwait exchange is up 486% over the last five years, Nairobi up 400% and Kathmandu is up 216% while the Dow is up 50% and the FTSE 100 up 42% over the same period.

To stay on top of new ETFs for your global portfolio, go to Chartwell ETF.

Big 2007 Winner Was Emerging Market ETFs

By Carl Delfeld of the Chartwell ETF Advisor

What can we learn from where investors put their money in markets around the world and the exchange-traded funds that track them during 2007?

The last week of the year saw some cash flow out of Money Market, Europe Equity and US Bond Funds and ETFs and into Energy Sector, US, Global and Global Emerging Markets Equity Funds acording to fund flow data from EPFR Global. Equity markets around the world rebounded from the previous week’s sharp drops and energy prices resumed their climb.

While the latest flows tracked by EPFR Global into US Equity Funds and ETFs pushed them into positive territory for the year, it did nothing to change the story for 2007: a massive rotation out of funds geared to developed markets into those geared to – or, in the case of Global Equity Funds, with some exposure to – emerging markets. Net flows into the GEM and Latin America Equity Funds and ETFs tracked weekly by EPFR Global were 361% and 305% of their 2006 totals while combined flows for Japan and Europe Equity Funds and ETFs were $63.7 billion lower than the previous year’s total.

At the country level Russia Country Funds such as (RSX) extended their winning run to 16 straight weeks and Brazil Country Funds and ETFs (EWZ) closed the books on a year that saw them post inflows that were nearly six times their 2006 total. But investors continued booking the profits generated by China’s frothy equity markets, with China Country Funds such as (FXI) and (GXC) are again seeing outflows despite their 75% collective portfolio gain for the year.

To use this useful data in building your ETF global portfolios, go to Chartwell ETF.

IBM Shifts Focus to Emerging Markets

By Carl Delfeld of the Chartwell ETF Advisor

IBM, a bit behind the curve, announced that it is ramping up focus on emerging markets that investors are already investing actively in through exchange-traded funds. This is a significant change in thinking for a firm that has always focused on traditional markets.

IBM is set to spend $1.6bn over the next three years as its hunt for growth takes it to smaller markets in the emerging world that have not previously been a focus of its efforts, according to an internal memo from its chief executive and described by Richard Waters of the FT.

The attempt to tap a wider range of developing countries comes as IBM’s earlier investment in three big markets which already have ETFs - Brazil (EWZ), India (IIF) and China (GXC) – has started to pay off.

Though still only a small part of its total revenues, business in these countries accounted for a quarter of IBM’s growth last year and plays an important part in the longer-term financial goals that Sam Palmisano has set.

In an e-mail to senior management, the IBM executive wrote of “a significant shift in our approach to the global marketplace” as the company sought to organise itself to deal with opportunities outside its normal scope. “Too often in the past, because we’ve built our plans by starting with our traditional markets, we haven’t focused sharply enough on the opportunities being generated elsewhere,” Mr Palmisano wrote.

Will China and India Close the Science Gap?

By Carl Delfeld of the Chartwell ETF Advisor

China and India comfortably led the world in scientific exploits before the 15th century. China surpassed Europe in its understanding of chemicals, industry and shipbuilding while India leapt ahead in mathematical ingenuity.

Why did they both lose their steam? And now that they have regained their mojo, what impact will technology have on their economies and stockmarkets tracked by exchange-traded funds like the iShares China (FXI) and the Morgan Stanley India (IIF) and China (CAF) funds?

A great article in the Economist by Simon Cox addresses this issue and what the furure might hold. In his book “The Lever of Riches”, Joel Mokyr settles on a simple explanation for China's technological stagnation: the country's imperial state lost interest. Its purposes were better served by continuity than by progress, and there was no rival source of power and patronage to pick up the threads it dropped. Roddam Narasimha of India's National Institute of Advanced Studies reaches a similar conclusion for India. “Up to the 18th century, the East in general was strong and prosperous, the status quo was comfortable, and there was no great internal pressure to change the global order,” he writes.

Ironically, while one out of every three software engineers in the world are Indian, India has only 24 personal computers for every 1,000 people, and fewer than three broadband connections. China has impressive numbers in terms of budgets and educating engineers and such but some question whether the quality of product is world class. Nevertheless, it presses on and by 2020, China aims to spend a bigger share of its GDP on research and development (R&D) than the European Union.

An unexpected twist of the tale may be that the challenge presented by the rise of India and China will lead to America, far from complacent, to redouible its efforts and maintain its lead. Keep in mind that all the Nobel prizes for science went to Americans in 2006.

If you happen to live in the Los Angeles area, I will be speaking this evening at 6:30 PM at the Pierpont Inn in Ventura on building a global ETF portfolio.

Emerging Market FDI Soaring with ETFs

By Carl Delfeld of the Chartwell ETF Advisor

It has been a tough week for emerging market exchange-traded funds like Brazil (EWZ), South Afruca (EZA) and Taiwan (EWT) but investors can take some solace that investment and FDI flows rremain robust.

The $1.21 billion that investors steered into emerging market funds and ETFs took year-to-date inflows up to $13.5 billion, over three times the full-year total for 2006.

Richard Gnodde, Co-CEO of Goldman Sachs International points out in the FT that Since 1990, cross-border capital flows have grown more than 10 per cent annually. Over that period, capital inflows to emerging markets have grown twice as fast as inflows to developed countries. Investment flowing to developing countries now accounts for nearly half of world total FDI inflows, compared with only 20 per cent in 1990. Even excluding China, the share doubled to 32 per cent.

A good example of this trend is the recent Industrial and Commercial Bank of China ’s $5.5bn investment in 20 per cent of Standard Bank of South Africa. It is the largest-ever overseas investment by a Chinese company, it is also the largest foreign direct investment in Africa.

While emerging markets are still somewhat tied to Europe and America, the trade and investment flows between emerging market countries are growing faster and should cushion any blow from any economic slowdown.

Emerging Markets Continue to Attract Fund Flows

By Carl Delfeld of the Chartwell ETF Advisor

Emerging markets and the exchange-traded funds that track them continue to attract sizable flows from big global money managers. According to EPFR Global, For the fourth week in a row the diversified global emerging market equity funds and ETFs posted the biggest inflows of any major equity fund group.

The $1.21 billion that investors steered into these funds took year-to-date inflows up to $13.5 billion, over three times the full-year total for 2006. Asia ex-Japan funds and ETFs also absorbed over $1 billion despite posting a collective portfolio loss of 3.96%, the worst showing among the major emerging markets fund groups, and have now taken in 115% of last year’s record-setting inflows.

Once again investors gravitated towards the larger emerging economies. Inflows into Brazil, Korea, China, Greater China and Russia Country Funds totaled $878 million while BRIC equity funds took in another $480.6 million. That represented 56% of the week’s net inflows into all emerging markets funds, up from 30.5% the previous week. With oil prices testing the $100 a barrel mark Russia Country Funds turned in the fourth best weekly performance among pure country funds behind energy major Saudi Arabia (+9.59%), Indonesia (+4.96%) and Vietnam (+1.62%).

One large emerging market that did not fare well was Mexico, which paid for its tight integration with the US economy as investors pulled the equivalent of 7.48% of their beginning of the week assets under management from Mexico Country Funds. That weighed on Latin America Equity Funds, which took in $105 million, well below their year-to-date weekly average of $225 million. EMEA Equity Funds also posted modest inflows.

“Investors globally have been gravitating to the sounder economic and fiscal story that emerging markets represents, but the ever-weakening dollar, if it turns into a destabilizing rout, could even damage the current rosy sentiment of investors towards emerging markets,” says Brad Durham, a managing director of EPFR Global.

Find out which emerging market ETFs should be in your portfolio by joining the Chartwell ETF Advisor.

Templeton's Mobius Cautions on Emerging Markets

Carl Delfeld of the Chartwell ETF Advisor

Emerging markets and the exchange-traded funds that track them may be vulnerable to the impact of the sub-prime problems according to a leader in emerging market investments.

“The biggest worry now is the psychological impact – and I emphasise psychological impact – of subprime,” Mr Mobius told FT.com in the website’s inaugural “View from the Markets” weekly video interview.

“I think a lot of people are focused on that and maybe have over-emphasised the impact of subprime.

“There’s no clear evidence that consumer spending is slowing down in America ... But now that it’s so much in the news it may have an impact on people’s propensity to invest. And so that could be a problem.”

Nevertheless, he said, some US investors were realising anew the value of diversification into developing countries. “[They] see emerging market currencies getting stronger against the US dollar, they see economies growing at a much faster pace – stronger than the US or Japan.”

Learn how to build a balanced global ETF portfolio by joining the Chartwell ETF Advisor

Biggest Threat to Emerging Markets is Politics, Not Economics

Emerging market ETFs staged a stunning rally today and, while the jury is still out, investor interest in these fast-growing markets seems to be alive and kicking. The major themes driving this growth which has averaged well over 7% in annual terms over the past five years seem clear. Market reforms and hospitality to foreign capital, better balance sheets and fiscal discipline leading to higher credit ratings and bulging FX reserves, urbanization leading to higher productivity, and the ability to catch up more rapidly due to breakthroughs in technology and communications. The world is truly filling in and moving tens of millions from poverty to the middle class. This is truly a wonderful development.

What could derail this locomotive? In my view, it won't be subprime lending or a liquidity crisis but rather politics. India's current ruling coalition is held together by alliances with factions at odds on just about every important issue including the Indo-US civil nuclear agreement, sealed last month in Washington after two years of gruelling negotiations. This exposes the clear anti-Americanism of the government’s communist allies and the stark opportunism of the Hindu nationalist opposition.

In Thailand, the recently approved "new" constitution can be best described as "managed democrocy" with a majority of the Senate to be appointed and a judiciary empowered to initiate legislation. In China, the ruling Communist mandarins are counting on continued strong economic growth to maintain power but if it falters only momentarily, it has only one card left to play and that is nationalism. You can feel traces of this in the government's response to some of the product safety issues that have surfaced as it charges that foreigners are trying to "demonize" China and Chinese products.

Protectionism and its kissing cousin nationalism are the issues that global ETF investors should watch very closely.

Global exchange-traded fund investors should not neglect the nice menu of emerging market ETFs that in some cases offer broader exposure than competitors such as the iShares family of ETFs. In particular, the
China ETF (GXC) offers investors five times more companies in its ETF basket compared with the iShares China ETF (FXI). There is also a growing interest in the Emerging Europe ETF (GUR). The Chartwell ETF Advisor will begin blending some of these options in its seven model ETF portfolios.

Here is a snapshot of these emerging market ETFs sponsored by State Street Global Advisors (SSGA) based upon the S&P/Citigroup Global Equity.

SPDR S&P Emerging Markets ETF (GMM) Index includes more than 1,500 companies across 26 emerging countries.

SPDR S&P Emerging Latin America ETF (GML) Index includes companies domiciled in Argentina, Brazil, Chile, Columbia, Mexico, Peru, and Venezuela.

SPDR S&P Emerging Middle East & Africa ETF (GAF) Index includes companies domiciled in Egypt, Israel, Jordan, Morocco, Nigeria, and South Africa.

SPDR S&P Emerging Europe ETF (GUR) Index features companies in countries that are nearing acceptance into the EU, including Czech Republic, Hungary, Poland, Russia, and Turkey.

SPDR S&P Emerging Asia Pacific ETF (GMF) Index includes companies domiciled in China, India, Indonesia, Malaysia, Pakistan, the Philippines, Taiwan, and Thailand.

SPDR S&P China ETF (GXC) Underlying index includes over 150 companies domiciled in China.

By Carl Delfeld of the Chartwell ETF Advisor

China Market Down But Asian ETFs Only Nicked

After a week where Asian markets and exchange-traded funds generally moved upward. China's Shanghai & Shenzhen 300 index made up of "A" shares today closed -4.3% after China's central bank chief Zhou Ziaochuan said that China's stock market may be overvalued and hinted at higher interest rates. But other Asian stock markets suffered much less severe declines: Nikkei -0.56%, Hang Seng -0.81%, Australia -0.83%, South Korea -0.69%. The European stock market is trading moderately lower on carry-over weakness from last Friday's US session. The European DJ Stoxx 50 is trading -0.64%.

For last week, Asian markets were generally up while the S&P 500 index lost 1.8%. The iShares China (FXI) led last week up 4.8% and 15.4% for the year. The iShares Taiwan (EWT) ETF was up 2.4% and iShares Malaysia (EWM) added 1.4% to increase its gain for the year to 32.3%. South Korea (EWY) which is up 22.4% so far this year lost 2.3% last week and Japan (EWJ) lost 1.3% for the week.

Posted by Carl Delfeld of the Chartwell ETF Advisor

Snapshot from Indonesia

Many ETF investors have only a vague understanding of Indonesia but it is a very important country with a population exceeding the US, represents the largest Muslim country in the world and lies at a geographically strategic position next critical gaeways of trade and commerce. It has also been one of the best performing markets in the world over the past 18 months and I use the closed-ended Indonesian Fund (IF) as a proxy for its stock market in our World Country ETF Rotation Strategy.

Mark Headly, CEO of Matthews Funds wrote the following update after a recent visit.

"A few days visiting Indonesian companies in the sprawling capital city of Jakarta was enough to remind one of the complexities of this vast archipelago nation. With over 13,000 islands and more than 100 language groups, Indonesia is one of the most diverse nations on the planet. Both government and company management alike face many challenges in such an environment. Indonesia has gone through intense trials since the Asian Crisis ripped its economy and political system apart. On a visit in 2002, a tank was parked in front of my hotel. General Suharto's thirty year dictatorship left a vacuum that was very hard for a young democracy to fill. The hostility towards the small domestic Chinese population that dominated much of Indonesia's business community was particularly intense.

Today, one finds a relatively serene environment, but security at hotels and office buildings is tight, with all vehicles carefully inspected before they are allowed through security posts. The damage to Indonesia's reputation by the bombing in Bali and a prominent Jakarta hotel lingers on. Otherwise, this society seems to be moving forward with significant activity on the streets and in shops. Jakarta has progressed immensely from my first visit in 1991, but much remains to be done. Major infrastructure projects have been stalled for years. Urban unemployment remains high as foreign direct investors continue to shun a country known for aggressive labor unions, high levels of corruption and unreliable infrastructure.

A whole new social contract is being hammered out between the dominant island of Java and the many outlying population centers. In recent years, Indonesia has made money by selling it resources, agricultural goods and exported labor with much of this activity occurring on the outer islands of Sumatra and Kalimantan. For Indonesia to fully regain the confidence of international and domestic investors, the development of the major cities must proceed with government efforts that meet the needs of their populations and the business community. While this will not be easy, the odds seem in favor of Indonesia's millions of young and enthusiastic citizens."

Posted by Carl Delfeld of the Chartwell ETF Advisor

Russia Grabs Pole Position, China Gains, in Emerging Markets ETF

Russian companies, fueled by the rapid growth and profitiability of its energy sector, have risen the ranks of the top ten companies in the emerging market index and the exchange-traded funds that track it such as (EEM).

The top ten holdings in this ETF basket in order of weighting are:

Gazprom (Russia)
Samsung Electronics (South Korea)
Posco (South Korea)
Taiwan Semiconductor (Taiwan)
Kookmin Bank (South Korea)
Silicon Precision (Taiwan)
Lukoil Holdings (Russia)
Chungwa Telecom (Taiwan)
China Mobile (Hong Kong)
United Microelectronics (Taiwan)

It may be surprising to many investors to see Taiwan with four out of the ten top holdings. China is also making progress and in the MSCI World index has pulled even with Taiwan and has also matched Hong Kong in terms of country weighting.

PetroChina announced today it would launch one of the biggest ever initial public offerings on the mainland market, becoming the latest large state-owned company to seek a Shanghai listing. The oil and gas group said it would issue up to 4bn shares in Shanghai which at Tuesday share price in Hong Kong, where it is already listed, would raise around $5.7bn

By Carl Delfeld of the Chartwell ETF Advisor

iShares FTSE/Xinhua China 25 Index (FXI)

Today FXI closed at $125.56 after a 2.31% increase. That puts FXI just off its 52 week high of $125.89.
Other noteworthy facts:
* FXI broker through a double top back at $120 when it also passed its bearish resistance level.
* There have been significant corrections to the downside like back in January and February. It would be wise to establish an exit strategy to capture any significant gains.
* Last year around this time FXI remained in demand for seven months and went from $70 to $118. (The past is no guarantee of the future)

Click image for larger view

By DE Smith of MyPortfolioView

Emerging Markets Exchange Traded Funds Recover

(Click Image for larger view)

(Click Image for larger veiw)

By DE Smith of MyPortfolioView

Samsung Dominates Top Heavy Korea ETF (EWY)

Samsung Electronics which represents 24% of the Korean exchange-traded fund (EWY) which has come alive this year after trailing other Asian markets over the past few years and was up 1.92% yesterday alone. It has become Asia’s largest technology company by market cap (larger than Sony), and its largest maker of memory chips and flat panel screens and mobile phones. Samsung enjoys a credit rating higher than South Korea’s sovereign rating. With 62 affiliates, the Samsung group dominates life in Korea like no other company in history. It represents 15% of the nation’s total economic activity, 25% of the capitalization of the KOSPI stock market and the taxes it pays represent almost 10% of total government income!

But the company is not a terrific play on the South Korean economy. Rather it is a global play on its three key markets and the expected payoff from its extraordinary commitment to R&D. The South Koreans are discontented because the five largest companies are growing outside the country more than in it and at a stage of development where it should be more competitive manufacturing onshore. The challenge is the low cost manufacturing platform with huge economies of scale just next door – the issue is China. Samsung already has already has 29 plants and 50,000 workers in China.

Since China is already starting to manufacture stuff like machine tools that the South Koreans were busily exporting in 2003 and 2004, South Korean planners believe it must quickly transform itself into a finance, communications and transportation hub – akin to the role of Singapore or Switzerland. The question then becomes does it have the right companies, the right skills and what is its competitive advantage?

Together, Samsung, POSCO, KEPCO (Korea Electric Power) and SK Telecom account for almost 50% of South Korean stock market’s market capitalization. To use a basketball analogy, the South Korean starting five are strong but its bench is a bit thin and its team has lost the home court advantage. The problem is not Samsung but rather that they need about ten more Samsungs.

The top four companies also make up 40% of the South Korea iShare (EWY) ETF which is up 29% so far this year. Samsung alone accounts for 23% of this ETF and buying the iShare gives you more exposure to the top ten South Korean companies. A stronger won and higher interest rates might lead to slower growth and the likely re-emergence of the North Korean problem may very well undermine investor confidence but the momentum of the market may offset some of these risks.

Earlier this year we increased exposure to South Korea in some of Chartwell's ETF Portfolios. after seeing that it was attractive on a relative valuation basis.

By Carl Delfeld of the Chartwell ETF Advisor

Six Popular Regional ETFs Move to the Downside by 5% Plus

Each of the following ETFs has recently reversed in value between 5% – 7%. For more information on each of the following ETFs you can login to your MyPortfolioView account by clicking here.

By DE Smith of MyPortfolioView

Is India Economy and ETF Too Hot?

Fears that India's economy, stock market and the exchange-traded fund (INP) that tracks it are overheated led its central bank to ramp up interest rates. Since January 2006 the Reserve Bank of India (RBI) has raised its overnight lending rate by one and a half percentage points, to 7.75% and the rupee, in turn, has jumped 10% in value versus the US dollar duringn the past four months alone.

But rather than slowing down, India's economy is speeding up. An article in the Economist states that JPMorgan estimates that growth in the three months to March accelerated to a seasonally adjusted annual rate of 11.4%. Yet, despite rapid growth, wholesale-price inflation fell to 5.1% in mid-May, down from 6.7% in January. Still the signs of an overheated economy are everywhere. A sharp increase in house prices, credit growth of 28% over the past 12 months, 15%-plus average rises in wages for skilled workers, record industrial capacity utilisation rates, and 41% more imports in April than a year ago.

Plus, consumer prices still appear to be rising at an annual 8% clip which likely means that more aggressive rate hikes are on the way. The trick is to slow growth down a bit without triggering a sharp decrease in economic activity - easier said than done and what in the US is often referred to as a soft landing.

The higher rupee has helped boost returns for investors in the India ETF but valuations may be getting a bit toppy. Still you must admire the underlying growth and momentum of the Indian economy. Will higher interest rates and a stronger currency blunt this mojo?

Join the Chartwell ETF Advisor and stay on top of the India story.

Latin American ETFs Gain, China Suffers Negative Flows

Investors continued to reduce their direct exposure to Chinese equities and exchange-traded funds during the first week of June, pulling over $1 billion out of China and Greater China Equity Funds tracked by
EPFR Global for the second week in a row. But they pumped another $810 million into Latin America Equity Funds, adding to their indirect bet on the Chinese economy’s robust growth and its demand for raw materials. ETFs and funds geared to developed markets had a mixed week. Japan ETFs and equity funds extended their losing streak. But US equity funds posted inflows on the strength of an exceptionally good week for Large Cap Growth Funds as interest rate fears took a brief holiday before resuming at mid week, European equity funds were back in the black and global equity funds and ETFs extended their winning streak to 13 straight weeks.

There was a strong suggestion in this week’s data that investors are looking for dips to buy into. Flows and fund performance were, for the most part, inversely correlated. The four equity fund groups that posted the best portfolio performance – Japan, Pacific, EMEA and Asia ex-Japan equity funds – all posted net outflows, while relative laggards such as European, Global and Latin America equity funds attracted fresh money.

At the country level Brazil has been the star in recent weeks. But Mexico Equity Funds took in $149 million during the week ending June 6, handily distancing Brazil Equity Funds in terms of flows as a percentage of assets under management.

Find out more by joining the Chartwell ETF Advisor

China Plunge Has Litttle Effect on Asian Markets

Chinese stocks took another sharp hit today but the global stock markets and the exchange-traded funds that track them have again taken the sell-off in stride. According to Barchart, China's Shanghai & Shenzhen 300 index closed -7.69% but the Nikkei index today closed slightly higher by +0.08% and the Hang Seng closed +0.62%. South Korea rallied +1.44% and Singapore rallied +0.87%.

The Chinese stock market has now fallen by 16% from its May 29 peak, with the Chinese government greasing the skids with its recent hike in the stamp tax on securities trading to +0.3% from +0.1%. The stamp tax hike illustrated that the government was looking for ways to take the air out of the stock market, which also suggested that the government will not provide any support.

It appears so far that the global marketplace is nonplussed by the China market adjustment with wide consensus that it was overvalued. Ironically, it may be thet "H" share markets will be a beneficiary not a casulty of the expected drop in China "A" shares available to Chinese only.

By Carl Delfeld of the Chartwell ETF Advisor

India Market Passes $1 Trillion Milestone

The India stock market, helped by its largest companies which play a key role in the performance of its exchange-traded fund (INP), passed the historical mark of surpassing $1 trillion in market value.

According to the Bombay Stock Exchange, the total market capitalisation of India's stocks this week reached Rs40,811bn or $1,009bn with the rupee trading at Rs40.45 to the dollar, market capitalisation at the close was $1,009bn. The Financial Times reports that The Bombay Sensitive Index, a basket of 30 large and liquid stocks, yesterday closed up 110 points, or 0.77 per cent, at 14,508. It has trebled in three years.

The exchange is now the 14th largest in the world but a recent Morgan Stanley study offerd a cautionary note since big stocks contributed most of the returns. Surprisingly, two-thirds of stocks have shown negative returns in the past 12 months. "India is likely to under-perform its peer group due to concerns on inflation and hence growth," Morgan Stanley said. "The absolute direction of the market is still a function of global risk appetite."

By Carl Delfeld of the Chartwell ETF Advisor

Brazil Beats China for Fund and ETF Investment Flows

During the last week in May, investment flows into emerging markets by global equity managers and exchange-traded funds tracked by EPFR Global tilted toward Latin America and in particular Brazil at the expense of China.

The $789 million that investors committed to Latin America funds and ETFs was driven in part by a reassessment of Brazil’s economic prospects following its latest ratings upgrade. That upgrade, allied to falling interest rates and the government’s willingness to at least entertain the idea of rationalizing Brazil’s tax system, point to some positive surprises from the region’s biggest economy during the second half of the year. Brazil equity funds took in $280 million, their best showing in percentage terms since the last week of January, 2006. But investors still expect some negative surprises from the biggest economy in the Asia ex-Japan universe: they pulled another $354 million out of China and Greater China funds as the Chinese government continues its effort to rein in the country’s red hot economy and its booming equity markets.

In addition, EPFR Global reports that year-to-date flows into Emerging Markets bond funds pushed over the $3 billion mark. Global and Pacific Equity, Utilities Sector and High Yield Bond Funds also extended their winning runs as the spread between US Treasuries and JP Morgan’s benchmark EMBI+ index narrowed to a new record low of 153 basis points. But China and Japan Country funds and ETFs remained out of favor, although the pace of outflows slowed somewhat, and funds geared to interest rate sensitive sectors were hit with further redemptions.

By Carl Delfeld of the Chartwell ETF Advisor

China ETF is not a Bubble?

While the Shanghai A-share index stood at 4,375 on May 23rd representing a 258% gain since the beginning of 2006; the China exchange-traded fund (FXI) made up of primarily H shares listed on the Hong Kong Stock Exchange is up less than 5% so far this year.

The Economist points out several reasons why the Shanghai market may not be a bubble after all. First, it looks at the valuation issue. Chinese shares certainly look expensive, with an average price-earnings ratio of almost 50 (based on historic profits). But p/e ratios are hard to interpret when profits are growing so strongly. Over the past decade China's p/e ratio has averaged 37, much higher than elsewhere. According to Goldman Sachs, firms listed on the A-share market enjoyed an average 82% increase in profits in the year to the first quarter. The article also notes that since 2003, Chnia has been the laggard of the four BRIC countries even with the rapid rise over the last year.

Next, it looks at the likely impact of a sharp pullback in China's market. The total value of tradable shares—that is, excluding those held by the government—is only 25% of GDP (the market capitalisation is nearly 80%). This compares with 150% in America and over 100% in India. Some estimate that only 7% of Chinese hold any shares at all compared to 50% plus in America. But this is changing fast as more than 300,000 new brokerage accounts are opened in China every day!

What is interesting is whether you can now buy H shares in Hong Kong at lower multiples for the same company that trades for on the Shanghai or Shenzhen market. This is certainly something worth looking into.

By Carl Delfeld of the Chartwell ETF Advisor

Russian ETF Primarily Energy Play

Tne new Russian exchange-traded fund (RSX) introduced by the Van Eck family of ETFs is decidedly an energy play. RSX tracks the DAXglobal Russia Index, which holds 30 companies based in Russia and attempts to represent the Russian economy broadly. RSX is very exposed to energy companies, accounting for over $150 billion of exports in 2006. Backtested the DAZglobal Index has yielded a 5-year annualized performance of about 40% .

This dependence on energy cuts both ways of course but keep in mind that politically Russia may present global ETF investors with more risk than other BRIC countries. Russia will also be watched closely as it elects new leadership in early 2008.

Jonathan Bernstein of ETFzone points out that only one company in the top eight holdings of RSX is not an energy company. This is Sberbank which is heavily involved in energy lending. A quick glance shows that almost 50% of the RSX basket is accounted for by the largest seven energy holdings. Still, RSX is far superior in terms of cost and flexibility to previous Russian funds on the market and has an annual fee of only 0.69%.

By Carl Delfeld of the Chartwell ETF Advisor

Asian ETFs Countries Backed By Huge FX Reserves

Ten years ago the Asian market meltdown started in Thailand and spread throughout emerging Asia as well as eventually overwhelming Russia in August 1998 and Brazil in early 1999. What is different now. Well better economic policies, better currency mangement, lower levels of foreign debt and huge foreign exchange reserves. China's $1.2 trillion in reserves is equivalent to 50% of its GDP.

Martin Wolf of the FT notes that Asians decided to choose competitive exchange rates, export-led growth and huge accumulations of foreign currency reserves in order to avoid what happened a decade ago. By February of this year, the foreign currency reserves of east and south Asian countries had reached $3,280bn, up by $2,490bn since the beginning of 1999. China's reserves alone reached $1,160bn, up by $1,010bn over the same period.

Wolf points out that Asian governments did not buy into IMF advice to float their currencies but instead manged them to keep them from getting overvalued and to spur exports which of course piled up trade surpluses and reserves.

By Carl Delfeld of the Chartwell ETF Advisor

ETF Investors Looking for Less Risk

The exodus from China and Greater China Country ETFs and Funds continued during the third week of May as investors – for the most part – kept backing away from ETFs fund groups geared to the riskier asset classes according to data collected and analyzed by EPFR Global. That trend was amplified by a broad reassessment of global interest rate trends that point to another round of inflation-fighting increases. Global Emerging Markets, Financial Sector, Western European, Japan and US Equity Funds all felt the impact of this renewed focus on monetary tightening.

But Latin America Equity ETFs and High Yield Bond Funds continue to defy gravity while Global Equity, Global Bond, Utilities Sector and US Balanced Funds again capitalized on the desire among many investors for lower risk. This week's pullback in European ETFs may be due to some uncomfortable valuations and concern that higher interest rates may slow economic growth.

By Carl Delfeld of the Chartwell ETF Advisor

Malaysia, Thailand and Singapore Lead Asian ETFs

While the China exchange-traded fund (FXI) has rebounded nicely from its 23% drop earlier this year to be up 17% for the year, it is the Southeast Asian countries of Malaysia, Singapore and Thailand that lead in part due to their stronger currencies.

Malaysia's Kuala Lumpur Composite Index, Malaysia's main stock exchange, has gained 23% so far this year but the Malaysian ETF (EWM) is up 34% aided by the weaker dollar. Keep in mind that country specific ETFs are not hedged. The Thai SET index is up 21% this year but the Thai Baht is up 7.9% against the US dollar. The Singapore ETF (EWS) which tracks the Straits Times index is up over 20% so far this year. Many global equity managers started earlier this year spreading their bets throughout Asia rather than focusing on just the two giants, India and China. ASEAN country GDP will collectively likely exceed $1 trillion this year aided by continued strong levels of foreign direct investment and exports.

Conventional wisdom a few years back was that Chinese economic growth would suck the life out of Southeast Asian countries but. as I predicted in the New Global ETF Investor, it has energized them. They have if anything become more attractive as manufacturing centers and also have developed an increasingly robust financial and service sectors.

By Carl Delfeld of the Chartwell ETF Advisor

China's Booming Trade Surplus

May 2007 ISI | The State Administration of Foreign Exchange (SAFE) recently released the government's official figures for China's balance of payments in 2006. On the back of a booming trade surplus, the country posted an enormous current-account surplus of US$249.9bn, equivalent to an estimated 9.2% of GDP and up from 7.1% the previous year. The rise in the surplus will provide further ammunition to critics of China's exchange-rate regime, leading to more pressure for more rapid renminbi appreciation. Domestically, the huge size of the surplus is likely to aggravate problems associated with excess liquidity in the economy, given the large inflows of foreign currency requiring conversion into renminbi that such a surplus implies.

An awesome trade machine
Observers were already expecting balance-of-payments data to show an extraordinarily large merchandise trade surplus, given that previously released customs data (which are calculated differently from balance-of-payments numbers) had already shown exports exceeding imports by US$177.5bn in 2006. In the event, as the balance-of-payments figure for imports was significantly lower than the customs figure, the trade surplus in balance-of-payments terms worked out at US$217.7bn. This was up from US$134.2bn in 2005 and accounted for 87% of the total current-account surplus last year. (Read More)

(Click image for larger view)

DE Smith of MyPortfolioView

Latin American ETFs Stand Out

Latin American exchange-traded fundsand the benchmarks they track havel managed to stand out with impressive gains this year.

The big two markets, Brazil and Mexico, followed by Chile, have already gleaned double-digit gains less than halfway through the year and have each set new record highs in the past week. The iShares Latin America ETF (ILF) has 88% of its basket directed at Mexico and Brazil. Brazil has for some time been the most overweight country in global equity manager's emerging market portfolios. Strong exports, higher foreign exchange reserves, high commodity prices, political stability and better corporate earnings plus reasonable valuations compared with other emerging and developed markets have all helped propel these markets higher.

Both country's also have stronger balance sheets and some outstanding companies in their ETF baskets such as American Movil and Cemex for mexico. Chile is also known as the star of Latin America for its pro-market policies and the tiny Peru market is the best performing market in the world so far this year.

Michael Mackenzie of the FT reports that Mexico’s Bolsa index of 35 companies has risen 13.3 % this year , while Chile’s Stock Market Select index of 40 companies has rallied 20.4 %. Leading the pack is a 78% rise in Peru’s 34-member index

By Carl Delfeld of the Chartwell ETF Advisor

China/India Oreo ETF

Are you looking for an exchange-traded fund which allows investors to easily invest in 40% of the world's population? The First Trust family of ETFs rolled out the Chindia ETF (FNI) which splits the fifty companies in its ETF basket between China and India.

The weighting of the companies in the ETF is creative and unique. The top three companies for each country based on liquidity are weighted at 7%, the next three at 4%, the next three at 2% and the remaining companies in the basket weighted equally. The ETF will be rebalanced semi-annually and the ETF has an expense ratio of 0.60%,

This weighting scheme is perhaps an improvement over the market cap weighting of say the iShares India ETN where about 35% of the basket goes to three companies; Infosys, Reliance and ICICI Bank. For the China iShare (FXI) the top 5 companies come to about 40% of the basket. Maybe FNI is a better option than a combination of FXI and INP.
By Carl Delfeld of the Chartwell ETF Advisor

Emerging Markets ETFs Show Strength!

Emerging Markets Strong – Of the 19 Emerging Markets ETFs tracked six have recently reversed into columns of O’s. 13 ETFs are still in columns of X’s maintaining their growth and a demand status. FXI Ishares Trust FTSE-Xinhua China 25 Index Fund is up 83.31% in 17 months. TIP: FXI gave up 23% earlier this year from January through March when the position went from $11,803 to $9,055. Watch this ETF carefully and don’t be afraid to realize some gains. MyPortfolioView has a very powerful tracking platform that can help you establish realistic buy and sell points.

Brazil Leads Emerging Market Allocations