Tag Archives: brazilian

Coffee Prices Crumbling: What Is The ETF Impact?

We certainly enjoy sipping a warm cup of coffee to start the day but when it comes to green unroasted coffee, traders and farmers have no reason to rejoice. This is because their prices are down about 36% in the past one year (as of October 26, 2015) and is currently trading near its two-year low. Meanwhile, the December coffee contract, on the Inter Continental Exchange (ICE) Futures U.S. exchange, is down 41.7% in the last one year. There are three factors that added to the long rout in the coffee market. First is the depreciation of the Brazilian real against the dollar. The real was already under pressure due to rising inflation, an investment-grade rating downgrade by Standard and Poor’s and fears of economic recession. After a short respite at the beginning of this month, the real started depreciating again against the greenback amid growing concerns of a budget deficit (excluding interest payments) and other political woes. A weak real encourages exports of the greenback priced coffee from Brazil – the world’s largest producer – as farmers try to capture higher profits. This will lead to an oversupply in the global market and hurt prices. The second factor is the forecast of excessive rainfall in Brazil’s top coffee-growing state, Minas Gerais. Weather forecasts indicated monsoon rains in fall and the winter and normal rains during the crucial stage of pod development from mid-December to early February. This has erased fears of drought in the region – a primary factor that had caused a surge in coffee prices in early 2014 – and increased the possibility of a longer-than-expected crop season. Lastly, the move by the Columbian government to lower the benchmark on the quality of beans deemed fit for exports could add to the supply glut in the global market. The threat of a surplus production looms large despite the possibility of dry weather due to El Niño in the coffee-growing regions. The battering in coffee prices had an adverse impact on the funds tracking the coffee market. Below we highlight two ETNs that experienced more than a 4% fall in the past five days and more than a 40% slide in the past one year (as of October 26, 2015). iPath Dow Jones-UBS Coffee ETN (NYSEARCA: JO ) This ETN tracks the Dow Jones-UBS Coffee Subindex Total Return, providing the returns that are available through an investment in the futures contracts on the commodity of coffee. The note has garnered nearly $108 million in assets and trades in a solid volume of 167,000 shares on average. The product is expensive with 75 bps in annual fees. The note was down nearly 5% in the last five days and about 48% in the past one year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook. iPath Pure Beta Coffee ETN (NYSEARCA: CAFE ) This ETN follows the Barclays Capital Coffee Pure Beta TR Index, providing returns that are available through an investment in the futures contracts in the coffee markets. The index consists of a single futures contract but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. CAFE is quite overlooked as it has gathered only $5 million in AUM and is thinly traded with an average volume of roughly 7,000 shares. This note also charges 75 bps in annual fees and lost 4% in the past five days and 44% in the last one year. It also carries a Zacks ETF Rank #3 with a High risk outlook. Original Post

Chalking Up Another BRIC

Summary It’s almost 15 years since Goldman Sachs coined the term “BRICs” for Brazil, Russia, India and China. Progress for the countries has been hit and miss, but it’s important to remember that we’re still less than 20% into the 21st century. Despite experiencing significant turbulence, these markets are still massive, representing 20% of the world economy. With Brazil and Russia seemingly bottoming out, there may never be a better time to get back onto the BRICs bandwagon. It’s almost 15 years since Goldman Sachs’ then chief economist, Jim O’Neill, coined the term ‘BRIC.’ The idea was that four countries (Brazil, Russia, India and China) were going to be the growth drivers for the 20th century. The idea was catchy, convincing and caught on. Soon, there were more acronyms and groups of countries doing the rounds: MINT and Next 11 were two that spring to mind, but probably none were as notorious as the BRICs. As of 2015, the BRICs aren’t nearly as popular with future gazers as they once were. True, China did experience several years of double-digit growth after the acronym was invented but you didn’t need an economist to tell you that would happen. Russia, India and Brazil have fluctuated between star performers and dunces of the class: in short, typical emerging market economies. All in all, a pass mark for the BRIC prediction but better predictions have been made. But as faddish as the term BRIC was in the middle of the last decade, it’s equally faddish now to write them off entirely. True, there hasn’t been much good news emanating from any of the BRIC countries for the past year or two but we’re not even 20% through the 21st century. Many of the fundamentals that Jim O’Neill attributed to the countries are still in place, meaning there are still opportunities for investors who are willing to ride out the inevitable storms. Furthermore, even if they’re out of vogue, the BRIC countries have a combined GDP of about 20% of the world economy. And close to a third of the world’s population. So, keeping an eye on their progress is not only of interest – it’s of importance . The iShares MSCI BRIC ETF (NYSEARCA: BKF ), which has understandably been a poor performer for the past five years. Given how the BRIC acronym has fallen from grace, there’s every chance the ETF will be removed from the Blackrock portfolio entirely over the next few years, so it may be better to watch the ETFs offered for each individual country when investing in this group is concerned. iShares MSCI Brazil Capped ETF (NYSEARCA: EWZ ) The Brazil ETF is trading at around half the level it was five years ago, and with Brazil facing into an economic abyss, it’s difficult to see this ETF recovering value anytime soon. The Brazilian real has been the biggest faller of any currency in the world in 2015, although it has stabilized in the past month and even made a minor recovery. It’s going to be a tough year or two for Brazil but markets have priced most of it in already. The component companies of this particular ETF are both well diversified (Brazil Foods, AmBev (NYSE: ABEV ), Bradesco Banking corporation (NYSE: BBD ), Vale mining (NYSE: VALE )) and not entirely dependent on the fate of the Brazilian economy. If (and it’s an ‘if’ not a ‘when’) President Rouseff finally deals with structural issues in the Brazilian economy, this ETF will almost certainly experience a bounce. iShares MSCI Russia Capped ETF (NYSEARCA: ERUS ) When Winston Churchill famously called the future of Russia ‘a riddle, wrapped in a mystery, inside an enigma,’ he may have been understating it. Sanctions against Russia in the past two years have inevitably led to a fall in its ETF, but possibly not by as much as one might expect. Vladimir Putin’s meetings with Obama in the past month that a defrosting of relations can’t be too far off – and with it, removal of sanctions, a jump in Russia’s economy and a boon to its stock market, the RTS. The Russia ETF is inevitably heavy on energy (Gazprom ( OTCPK:OGZPY ), Transneft, Tatneft ( OTCPK:OAOFY )), but also has some of the largest food retailers in Europe in its composition (Magnit). There’s one thing you can certainly say about Russia (which also goes for the other countries on this list), which should apply to its ETF: The country has weathered so many economic crises that it can surely ride out another one and come back stronger in the future. iShares MSCI India Index ETF (BATS: INDA ) And the star performer of the BRICs group is… India. Unlike the first two ETFs in this group, India isn’t going through a particularly dire economic period. Its growth is still hovering at around 4% – highly respectable in global terms. Just this week, CNBC released an article under the heading, “Why India is turning into everyone’s favorite EM.” Therein, it referred to India as “the world’s new growth engine.” Basically, what Jim O’Neill at Goldman Sachs predicted all those years ago. This ETF is trading at around 14,000, about 40% over what it was trading for three years ago. There are several familiar names in its composition, including some tech firms (Infosys (NYSE: INFY ), Tata (NYSE: TTM )), pharmaceuticals (Sun Pharmaceutical ( OTC:SMPQY )) and consumer staples (Hindustan Unilever ( OTC:HNSQY )). Industrial production in India is on an uptick, and many of these component companies will be the beneficiaries. iShares China Large-Cap ETF (NYSEARCA: FXI ) It’s hard not to detect an element of schadenfreude in the U.S. Press about China’s short-term economic demise. It would be unwise of anyone to think it’s going to be anything but short-term, though. Having dropped off a cliff at the beginning of 2015, falling by around 33% in just a few short months, the China Large-Cap ETF has already begun to rebound on the back of the Chinese Government’s aggressive economic policy. Other good news comes for China’s economy in the form that the Yuan has overtaken Japan’s yen as a unit of exchange. The China-Large Cap ETF gives investors exposure to 50 of the largest Chinese companies, and if you don’t know their names now, you soon will. There are large financials (Bank of China ( OTCPK:BACHY ), ICBC ( OTCPK:IDCBY ) and China Life Insurance (NYSE: LFC )), technology and telecommunications firms (Tencent Holdings ( OTCPK:TCEHY ) and China Mobile (NYSE: CHL )) and some energy giants (PetroChina (NYSE: PTR ) and CNOOC (NYSE: CEO )). A position on this ETF is a position on China’s future – and nearly fifteen years on from Jim O’Neill’s coining of the term BRICs, China is still the one you should invest in. With prices down 33% on last year, now is not a bad time to get involved. Conclusion Long after popular acronyms fade away, fundamentals remain. Anyone who thought investing in four of the world’s largest emerging markets and wouldn’t get a bumpy ride was fooling themselves. The BRICs provide enough evidence of that. However, with 20% of the world economy and over 30% of the world’s population, the BRICs still represent an excellent choice for anyone who wants to take a position on the long-term. There’s a maxim here which applies almost perfectly right now: Be careful when others are greedy and greedy when others are careful. In 2015 where the BRICs are concerned, too many are being careful. It may be your opportunity to be greedy.

Best And Worst Performing ETFs Of September

September is historically considered as the scariest month for the stock market and this year particularly proved it to be true. A calculation carried out by moneychimp.com in the year range 1950 to 2014 revealed that September ended up offering negative returns in 36 years and positive returns in 29 years, leading to an average return of -0.65%. Thanks to the persistent China-led slowdown, a new climate of uncertainty triggered by Fed’s “no lift-off” announcement, outburst of the bizarre Volkswagen ( OTCQX:VLKAY ) scandal, tumbling commodity prices and the huge sell-off in biotech stocks, September was a witness to a lot of turbulence (read: 3 Hit and Flop Zones of Q3 and Their ETFs ). Both the major U.S. benchmarks – S&P 500 and the Dow Jones Industrial Average – continued its correction during the month. The S&P 500 lost 2.6% while the DJIA shed 1.5%. Let’s take a look at the three best and worst performing ETFs of this chaotic month (read: Top ETF Stories of September ). Top Performers iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) – Up 12.61% Sugar prices recovered 15% at the end of September after hitting its seven-year low in August. The upsurge was driven by appreciation of the Brazilian Real against the U.S. dollar and the country’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a stronger dollar encourages more sugar exports from the country, dampening its prices. As a result, SGG became the top performer of the month. SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53 million in assets and trades in a daily volume of 48,000 shares. It charges 75 bps in fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. iPath Dow Jones-UBS Tin Total Return Sub-Index ETN (NYSEARCA: JJT ) – Up 11.87% Tin was one exception among the commodities experiencing a bullish trend in prices amid fears of supply shortage. Solder used in electronics accounts for about half of the global demand for tin. In the past one month, tin prices rose 5.8% . Indonesia, the world’s largest tin exporter, imposed restrictions on tin exports in order to curb illegal mining. The country has mandated that all tins going out of the country must come from government-certified mines. Further, tin output from Myanmar, the new entrant in the tin market, has been declining due to falling ore grades. These took the ETN to new heights. JJT tracks the Dow Jones-UBS Tin Subindex Total Return index, consisting of one futures contract on tin. However, the note has not yet received enough attention gathering only $2 million in assets and trading in a paltry volume of roughly 300 shares per day. It charges 75 bps in fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook. ETFS Physical Palladium Shares ETF (NYSEARCA: PALL ) – Up 8.51% Palladium is another metal that is witnessing rising prices. It is actually a surprise gainer from the Volkswagen scandal, which has turned consumers away from diesel-engine vehicles toward gasoline-engine vehicles, where the precious metal is used in catalytic converters. Palladium prices rose 14.8% last month. As a result, this ETF was a top performing candidate in the month. The ETF tracks the spot price of palladium bullion and amassed roughly $223 million in assets. This fund charges 60 bps in fees and trades in an average volume of 34,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook. Worst Performers AccuShares Spot CBOE VIX Up Shares ETF (NASDAQ: VXUP ) – Down 58.85% The presence of this volatility ETF among the worst performers is surprising when this asset class have been investors’ darling during the third quarter as they tend to outperform when markets are falling or fear levels over the future are high. VXUP offer direct “spot” exposure to the CBOE Volatility Index or ‘VIX’, also known as fear gauge and the best representative of volatility in the stock market. It is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX was indeed down 13.8% in the last month, pointing to investors’ belief that market may not reach its bottom in the near term. This few-months old fund has market capitalization of $1.1 million and trades in an average volume of a meager 5,000 shares. It charges 95 bps in fees. Barclays Return on Disability ETN (NYSEARCA: RODI ) – Down 36.45% RODI is a thinly traded ETN, which exchanges only 50 shares in hand per day. Thinly traded assets are considered very risky due to its illiquidity and are not a proper choice of investors at turbulent times. This note seeks to track the performance of the Return on Disability US Large Cap ETN Total Return USD Index which zeroes in on companies that have very favorable policies towards the disabled, both as customers and workers. It charges 45 bps in fees and has a market capitalization of $26.8 million. InfraCap MLP ETF (NYSEARCA: AMZA ) – Down 22.06% Units of energy-based master limited partnerships or MLPs are trading in the south due to the continued slide in crude oil price. AMZA seeks total return through investments in equity securities of publicly-traded MLPs and limited liability companies taxed as partnerships. AMZA is highly exposed to MLPs engaged in the midstream oil and gas sector, which has been experiencing huge sell-off. This made the ETF one of the worst performing candidates in September. The fund has garnered only $16 million in assets and trades in an average volume of 22,000 shares. It charges a hefty 270 bps in fees. Link to the original article on Zacks.com