Tag Archives: chinese

Weaker Yuan Put Currency-Hedged Chinese ETFs In Focus

Devaluation fear is gripping the Chinese currency yuan market again after five months. The currency fell to a four-month low level last week and stoked possibilities of further weakness going forward. A host of reasons are responsible for this. First, the relentless flow of offhand economic data added fuel to hopes for further stimulus measures. The Chinese economy is on its way to deliver a 25-year low expansion this year. China has already rolled-out a few of policy easing measures which haven’t yet materially lifted economic growth. The likeliness of more easing should devalue the currency ahead. In August, China’s central bank devalued the currency by 2%, following which yuan posted the largest single-day decline since the historical devaluation in 1994, after the country arranged its official and market rates in a line. Notably, the Chinese authorities follow a trading band around the official reference rate it sets each day for the value of yuan against the U.S. dollar. The Chinese government announced in August that renminbi’s central parity rate would follow the previous day’s closing spot rates more closely going forward. This indicates China’s intent to make its currency more market driven. As a result, a section of analysts believe that the actual motive behind this currency move was to prepare yuan as a reserve currency. However, the Chinese central bank assured the market that it will promptly intervene into the currency market if depreciation crosses the 3% mark. Now, with yuan getting the IMF nod to join the reserve currency basket from October 2016, China’s efforts the make the currency more “freely usable” and market oriented will likely go on (read: IMF Green Signal Put Yuan ETFs in Focus ). Last week, the currency weakened for two successive sessions amid lower fixings from the central bank, per CNBC . At the current level, yuan hovers around a four-and-a-half year low as PBOC fixed the yuan/dollar official midpoint ‘at its weakest since July 2011′. If this weakening continues, Asian emerging markets which are largely involved in exports would end up in a currency-war. Most export-centric economies will likely be forced to depreciate their currencies to stave off competitive and rev up their exports (read: 3 Country ETFs Impacted By China Currency Devaluation ). The investing world is divided into two clusters. While one part believes that there is no basis for persistent yuan depreciation, the other believes that extra devaluation is needed for the balance of payments’ adjustments, and for the authorities to jumpstart the economy and stamp out deflationary fears. The PBOC announced late last Friday that it has rolled out a yuan index rate against a basket of currencies, rather than tracking the greenback solely. Some see this as an indication of further weakening in yuan. Un-hedged ETFs tracking the nation have actually outperformed the broader market so far in Q4. Investors should note that even after such speculation, yuan declined just 0.26% against the U.S. dollar from August 12 to December 10, which is not at all a material devaluation. Still investors fearing yuan devaluation but still wishing to be invested in China ETFs, might try these two below-mentioned currency-hedged ETFs. The CSOP MSCI China A International Hedged ETF (NYSEARCA: CNHX ) in Focus The CSOP MSCI China A International Hedged Exchange Traded Fund looks to track the performance of the MSCI China A International with CNH 100% Hedged to USD Index. The index delivers the performance by hedging the currency exposure of the MSCI China A International Index, to the USD. The index is 100% hedged to the USD by selling Renminbi currency forwards at the one-month forward rate. Making its debut in mid October, the fund has amassed about $3 million in assets. It charges 79 bps in fees. The index is heavy on financials which makes up about one-third of the portfolio followed by Industrials (17.9%). The 381-holding product is extremely diversified in nature with no stock accounting for more than 0.01% of the basket. The Deutsche X-trackers CSI 300 China A-Shares Hedged Equity ETF (NYSEARCA: ASHX ) in Focus The Deutsche X-trackers CSI 300 China A-Shares Hedged Equity ETF looks to track the CSI 300 USD Hedged Index. The fund has amassed about $2.5 million in assets and its expense ratio is 0.85%. This index also has a tilt toward the financial sector with about 40% exposure. Industrials (17.1%) and Consumer Discretionary (11.2%) take the next two spots. In short, the fund is the currency-hedged version of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEARCA: ASHR ) . Notably, the 300-stock ASHR is also a diversified fund, though not as wide as CNHX. The top holding of ASHR takes 4.05% of the fund. Link to the original post on Zacks.com

5 ETFs Losing Half Or More Of Its Value In 2015

Overall, 2015 has not been good for the U.S. equity market, caught up as it was in a vicious circle of never-ending woes. It all started with Fed uncertainty, a strong dollar and slumping commodities, and then extended to geopolitical tensions and global growth concerns, especially in China. Additionally, the U.S. economy, which was growing at a faster rate in over a decade in 2014, has cooled off substantially this year. While healing labor market, a gradual recovery in the housing market, robust auto industry, and cheap fuel are driving growth, persistent weakness in manufacturing activity, plunging oil prices, and shaky consumer confidence are posing threats to economic expansion (read: 5 ETFs for Loads of Holiday Shopping Delight ). As a result, the major indices – the S&P 500 and Dow Jones – are in the red territory from a year-to-date look, losing 0.3% and 1.4%, respectively. In fact, a number of products have been crushed, piling up huge losses for many ETFs. Below, we have highlighted five ETFs that have been hit badly so far in 2015 and might continue their rough trading in the months ahead if the trends persist unabated. First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) – Down 56.5% Natural gas producers have been the biggest laggard this year on falling natural gas price. This trend is likely to continue in the months ahead given declining demand, increasing production, and growing global glut. Additionally, the expectation of a milder weather for late December – the key period that drives heating demand – will push the natural gas price lower. The Energy Information Administration (NYSEMKT: EIA ) expects heating bill to decline 13% this winter (read: No Winter Cheer for Natural Gas ETFs? ). Consequently, FCG, which offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas, is down 56.5% in the year-to-date time frame. It follows the ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across components with none holding more than a 7.1% share. The fund has amassed $172 million in its asset base while charging 60 bps in annual fees. Volume is good with more than 1.7 million shares exchanged per day on average. The ETF has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook. First Trust ISE Global Platinum Index ETF (NASDAQ: PLTM ) – Down 54.3% The precious metal space has been hit by the double whammy of the broad market commodity rout and rate hike concerns. Robust supply and dwindling demand are weighing on the price of platinum since the start of the year. Additionally, the prospect of a rate hike backed by solid job numbers and moderate inflation has dampened the appeal for platinum. As such, PPLT has fallen 54.3% so far this year. The fund provides exposure to the companies that are active in platinum group metals mining by tracking the ISE Global Platinum. In total, it holds 18 securities in its basket with double-digit concentration in the top three firms. Other firms do not hold more than an 8.07% share. South African firms take the largest share in the basket at 27.6% followed by double-digit exposure each in Australia, United Kingdom, United States, Russia and Canada. Market Vectors Coal ETF (NYSEARCA: KOL ) – Down 54.0% Coal has fallen completely out of favor over the past few years due to the thriving alternative energy space and weak global industry fundamentals. The depletion of fossil fuel reserves, global warming and high fuel emission issues, new and advanced technologies as well as more efficient applications are making clean power more feasible, reducing the demand for the black diamond. These are making it difficult for the coal miners to sustain their profitability and margins. As a result, the ETF targeting the global coal industry has seen a wild ride and was off nearly 54% so far this year. KOL tracks the Market Vectors Global Coal Index. Holding 27 securities in the basket, the fund is concentrated in the top 10 holdings at 64.6% of total assets. It has a Chinese focus accounting for 28.4% of the portfolio while U.S., Australia and Canada round off the next three. The fund has amassed $42.5 million in its asset base and trades in average daily volume of 71,000 shares. Expense ratio came in at 0.59%. KOL has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook. Yorkville High Income MLP ETF (NYSEARCA: YMLP ) – Down 52.7% MLP was the worst hit corner from the oil price carnage with YMLP shedding the most – 52.7% in the year-to-date time frame. Being an interest rate sensitive sector, these securities will be further impacted by rising rates. This bearish trend is likely to continue as the Fed is on track to increase rates as early as next week. The fund follows the Solactive High Income MLP Index, charging investors 82 bps in annual fees. Holding 26 stocks in its basket, it is highly concentrated in the top 10 holdings at 58.3%, suggesting higher concentration risk. Oil & gas pipeline products take the top spot from a sector look at 40%, followed by oil refining & marketing (12%), and oil & gas drilling (10%). The product has managed $101.3 million in AUM and trades in moderate volume of 137,000 shares. SPDR S&P Metals & Mining ETF (NYSEARCA: XME ) – Down 50.0% Thanks to plunging metal prices and weak global trends, this broad metal & mining ETF has also lost half of its value. Acting as leveraged plays on underlying metal prices, metal miners tend to experience huge losses than their bullion cousins in the slumping metal market. In particular, a strong U.S. currency is making dollar-denominated assets more expensive for foreign investors, thereby dulling the appeal for these commodities. The ETF offers a broad exposure to the U.S. metal and mining industry by tracking the S&P Metals & Mining Select Industry Index. Holding 30 stocks in its basket, it uses an equal weight methodology and does not put more than 6.8% of assets in a single security. In terms of industrial exposure, steel makes up a large chunk at 49.3%, while diversified metals and mining, and gold round out the next two spots with double-digit allocation each. The product has $242.4 million in AUM and trades in solid trading volumes of more than 2.6 million shares per day on average. It charges 35 bps in fees and expenses. Link to the original post on Zacks.com