Tag Archives: asian

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.

Reasons Asia Should Be The Focus Of Investors

Asia is a continent with huge potential and a multitude of growth opportunities in various industries. The tech industry in the region is growing at a fast pace, though it is not the only opportunity that can be found. There are many other rising industries, and they remain untapped at this day. One of the many reasons why investors should look more into Asia is because of the continent’s fast-developing high-tech environment. While everyone knows about the innovation coming out of Silicon Valley, companies from tech hubs such as Singapore , Hong Kong and Tokyo are under the radar of many investors and there are many stocks in Asia that are on the cutting edge, yet have a very attractive valuation. Mobile is becoming very big, with some markets’ growth predicted to be hugely reliant on it in the near future. A report from Forrester expects online spending in China to reach US$1 trillion in 4 years through the growing use of mobile apps. An environment where people will use more mobile devices with improved networks, increased application usage, and more e-commerce entails emerging opportunities for every type of business. Another reason Asia should be on any investor’s radar is because of its huge market size. The continent’s population is very large, with an estimated 4.3 billion people living in the Asia-Pacific region in 2014, according to the United Nations Economic and Social Commission for Asia . This represents 60% of the world’s population, not only entailing a huge pool of potential customers, but also for untapped talent that has yet to be discovered. A growing population along with an easier access and an evolving tech industry will enable more talent to grow in the field of engineering and design, adding to the Asian market’s performance. Opportunities in Asia are limitless with this large base of potential customers and promising future talents. There is still a lot of room for creativity, innovation and unique opportunities as most of Asia is not already in the mature stage that the United States and Western Europe is. The startup environment is growing at an incredible speed, making it a very inspiring place to conduct business in. According to CB Insights, Beijing, Tokyo, Shanghai and Bangalore figured in the top 6 cities in the world to grow the fastest in venture-capital deals and dollars last year. Indeed, deals increased by 165% between 2013 and 2014 in Beijing. India is the fastest growing startup ecosystem in the world according to a study conducted by the National Association of Software and Service Companies. India is launching nearly 800 startups per year. Furthermore, the major Asian cities are equipped with advanced and developed infrastructure. This facilitates the process of business creation, and enables rapid growth. Asia has received a lot of investment both in economic and social infrastructure, and improvements are already clearly visible. These investments also help to reduce barriers for trade. Entry of foreign businesses in Asia is easier and more opportunities are rising. For example, Japan now has less demanding requirements for foreigners to start their businesses in the country as they no longer need a permanent residence. A growing trend of economic liberalization, an untapped pool of consumers and talent, great infrastructure and a rapidly growing startup scene all bode well for Asia in the 21st century.

U.S. Treasury ETFs Rise On Yuan Devaluation

The global investing world across asset classes was caught off guard on August 11 as Chinese policymakers devalued the country’s currency by 2% against the greenback to boost its waning export profile. The step resulted in the largest single-day decline since the historical devaluation in 1994 , after China arranged its official and market rates in a line. As a result, yuan has now plunged to a four-year low level. The Chinese central bank defended its currency intervention ‘as a free-market reform’, but global experts apprehend a currency war in the near future, especially among the Asian tigers. Most export-centric economies are likely to resort to currency devaluation to rev up their exports. However, yuan devaluation took the global markets in its grip as most asset classes were in red. In fact, the move was criticized by U.S. lawmakers and viewed as means of taking undue favor in exports. Bloodbath in global equities, commodities and currencies spurred a flight to safety for a valid reason. Several ETFs on safe haven assets including greenback-based PowerShares DB US Dollar Index Bullish Fund (NYSEARCA: UUP ) and gold bullion-based SPDR Gold Shares (NYSEARCA: GLD ) added gains on August 11. UUP gained 1.5% after hours and GLD added 0.5% in the key trading session. Here investors should note that the UUP’s strength came mainly on the back of Yuan devaluation and the looming Fed rate hike concern; a safe haven criterion played a lesser role for its ascent. On the other hand, though gold advanced for a day, we are skeptical about its momentum as the metal is due for a southward ride (presumably) in the near term due to a number of issues. In fact, this yuan devaluation will likely curb the import demand of gold from China (a key gold consuming nation) as a feebler currency will turn imports pricier. U.S. Treasury: True Safe-Haven In such a backdrop, investors started to position themselves for the imminent volatility in the risky assets and started to park their money in the safer U.S. treasuries, despite the Fed rate hike worries. Most U.S. treasury ETFs, specially the long-dated ones, added considerable gains on August 11. Yields on the U.S. benchmark 10-year notes, slipped to 2.15% on August 11 from 2.24% the day before. Below we have highlighted four Treasury ETFs that have hogged investors’ attention lately and added gains despite the looming rate hike concerns. Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) This fund provides exposure to the long-term Treasury STRIPS market by tracking the Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. The fund holds 71 bonds in total with effective maturity of 25.2 years and average duration of 24.8 years. Expense ratio comes in at 0.12%. The product has amassed $379.2 million in its asset base. Its gains came in at 2.14% in the yesterday’s session (on August 11). Pimco 7-15 Year U.S. Treasury Index Fund (NYSEARCA: TENZ ) The fund looks to track the returns of the BofA Merrill Lynch 7-15 Year US Treasury Index. The index is unmanaged and tracks the performance of the direct Sovereign debt of the U.S. Government with at least $1 billion in outstanding face value and a remaining term to final maturity of at least 7 years and less than 15 years. The fund has amassed over $24 million in assets so far and charges 15 bps in fees. The fund holds 15 bonds in total with effective maturity of 9.03 years and average duration of 7.89 years. TENZ was up over 2.8% in the last session. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $4.92 billion. Expense ratio comes in at 0.15%. Holding 29 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.82 years and effective duration of 17.35 years. The fund was up 1.6% on August 11. SPDR Barclays Capital Long Term Treasury ETF (NYSEARCA: TLO ) The fund considers U.S. treasuries that have a remaining maturity of 10 or more years. The $201 million-fund holds 45 securities with average maturity of 24.98 years and effective duration of 17.23 years. The fund charges 10 bps in fess and was up about 1.5% on August 11. Bottom Line Having said this, we would like to note that the bond market is in a volatile mood. Especially the U.S. fixed income space is in a tug of war between safe haven demand and the imminent Fed rate hike. Though U.S. benchmark yields fell lately, any hint at Fed policy normalization will once again push up interest rates. So, edgy investors need to be hawk-eyed before playing the safe-haven fixed-income securities in this choppy market. Original Post