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3 Mutual Funds To Buy On A Resurgent Chinese Economy

The Chinese economy has been at the root of the broader market malaise since the start of 2016. But, the world’s second largest economy showed signs of improvement in March. China’s factory indicators point to a pickup in the economy supported by greater stability in the yuan and a rise in its stock markets. Pressure on emerging markets including China eased due to the Federal Reserve’s cautious stance to hike rates in the future. Higher rates in the U.S. mostly results in outflows from these markets. China’s service sector also expanded last month, which bodes well for the country’s long-term goal of transforming into a consumer-driven economy. Increase in stimulus measures from Chinese authorities helped the service sector to move north. Given the recovery in manufacturing and services, it will not be unwise to invest in mutual funds that are exposed to the Chinese economy. When you add industrial profits gaining immensely in the first two months of this year and consumer sentiment touching record levels last month, China doesn’t seem to be in a bad proposition. Before we cherry pick some good funds, let’s take a look at the latest data: Manufacturing Expands After eight consecutive months of decline, China’s official manufacturing PMI came in at 50.2 in March. Any reading above 50 indicates expansion. There has also been a marked improvement in production and new orders. The production index went up to 52.3 in March from 50.2 in February, while the new orders index rose to 51.4 from 48.6 in February. A separate indicator, the private Caixin manufacturing PMI, rose to 49.7 in March from 48.0 in February. In spite of being below 50, it turned out to be the index’s highest reading in the past 13 months. Caixin Insight Group Chief Economist He Fan pointed out that “the output and new order categories rose above the neutral 50-point level, indicating that the stimulus policies the government has implemented have begun to take hold.” China-focused funds such as the Oberweis China Opportunities Fund (MUTF: OBCHX ) and the Matthews China Fund (MUTF: MCHFX ) are poised to benefit from this uptick in factory output. These mutual funds have invested in companies such as Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM ), China Mobile Limited (NYSE: CHL ), CNOOC Ltd. (NYSE: CEO ) and Tencent Holdings ( OTCPK:TCEHY ) that are direct beneficiaries of a rise in factory activities. Services Gain Momentum China’s official non-manufacturing PMI rose to 53.8 in March from 52.7 in February. This showed expansion in the service sector, which has become a major source of economic and employment growth in the country. Sub-indices of the non-manufacturing PMI including the new orders index, input price index, and sales price index all improved in March. The non-manufacturing PMI generally includes retail, aviation, technology, telecommunications, financials and construction sectors. Funds such as the AllianzGI China Equity Fund Class A (MUTF: ALQAX ) and the Eaton Vance Greater China Growth Fund Class A (MUTF: EVCGX ) are positioned to immensely benefit as they have significant exposure to the aforementioned sectors. 3 China-Focused Mutual Funds to Invest In Rise in both industrial and service activities in China will surely help its economy to navigate through troubled waters. Moreover, the country’s industrial profits climbed 4.8% to about $119.8 billion in the first two months of this year, according to the National Bureau of Statistics (NBS). Recovery in real estate industry was cited to be the reason behind this increase in industrial profits. NBS analyst He Ping added that the “positive trend was driven in part by quicker product sales of industrial firms and a narrowing in the decline of industrial producer prices.” Consumer sentiment too rose sharply in March. The Westpac MNI China Consumer Sentiment Indicator jumped 6.1% to 118.1 in March, its highest level since Sep. 2015. Banking on this optimism, it will be wise to invest in China focused mutual funds that have gained in the last one-month period. Further, these funds possess strong fundamentals, which will eventually help them continue gaining in the future as well. We have selected three such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), offer minimum initial investment within $5,000, carry a low expense ratio and have given positive returns in the last four weeks. Matthews China Investor seeks to achieve its investment objective by investing a large portion of its assets in the common and preferred stocks of companies located in China. MCHFX’s 4-week return is 1.9%. Annual expense ratio of 1.14% is lower than the category average of 1.76%. MCHFX has a Zacks Mutual Fund Rank #1. AllianzGI China Equity A seeks to achieve its objective by normally investing a major portion of its assets in equity securities of Chinese companies. ALQAX’s 4-week return is almost 7%. Annual expense ratio of 1.70% is lower than the category average of 1.76%. ALQAX has a Zacks Mutual Fund Rank #2. Invesco Greater China Y (MUTF: AMCYX ) invests the majority of its assets in equity or equity-related instruments issued by companies located in Greater China and in other instruments that have economic characteristics similar to such securities. AMCYX’s 4-week return is 7.1%. Annual expense ratio of 1.63% is lower than the category average of 1.76%. AMCYX has a Zacks Mutual Fund Rank #2. Original Post Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

5 ETFs To Buy For Q2

After a terrible start to the year, the U.S. stock market made a stunning comeback in the last six weeks of the first quarter. This is especially true as the major U.S. bourses recouped all the losses after falling more than 14% (as of February 11) from their recent peak levels. Notably, both the S&P 500 and Dow Jones were in the green at the end of the quarter, having logged in 0.8% and 1.5% gains, respectively. The impressive rally was driven by a rebound in oil prices, a spate of upbeat U.S. economic data, extra easing policies in Europe and Japan, and stabilization in the Chinese economy. Additionally, the Fed’s dovish comments infused more optimism in the stock markets lately. The bullish trend is likely to continue at least in the second quarter given the substantial improvement in the economy, an accelerating job market, pick-up in inflation as well as increasing consumer confidence. Further, the Fed is not expected to raise interest rates anytime soon given the global growth concerns that should drive the U.S. stocks higher. Nevertheless, bouts of volatility will keep threatening the bulls. Some of the headwinds include relatively higher valuations, risk of earnings weakness like what we saw in the fourth quarter, and oil price instability. As the U.S. economy is leading the way amid global uncertainty, investors should focus on the domestic market. We have highlighted five picks for 2Q that should outperform and cost less than many other products. These funds have either a Zacks Rank of 1 (Strong Buy) or 2 (Buy). iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) Low volatility products generate impressive returns or often outperform in an uncertain or a crumbling market while providing significant protection. This is because these funds include more stable stocks that have experienced the least price movement in their portfolio. As a result, low-volatility strategies appear safe in a turbulent market, and reduce losses in declining markets while generating decent returns when the markets rise. As such, USMV could be a great pick with an AUM of $11.3 billion and an expense ratio of 0.15%. It offers exposure to 168 U.S. stocks having lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. The fund is well spread across a number of securities with none holding more than 1.71% of assets. From a sector look, financials, health care, information technology and consumer staples take the top four spots with a double-digit allocation each. The fund trades in solid volume of 3 million shares a day and has gained 6.4% in the year-to-date time frame. It has a Zacks ETF Rank of 2. SPDR S&P Dividend ETF (NYSEARCA: SDY ) Dividend-focused ETFs have been riding high this year on investors’ drive for income amid heightened uncertainty in the stock market. This is because dividend paying securities are the major sources of consistent income when returns from the equity market are at risk. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less immune to the large swings in stock prices. Further, longer-than-expected interest rates have made this corner a hot investment area. As a result, SDY seems an interesting choice for the second quarter. This is one of the popular and liquid ETFs in the dividend space with AUM of $13.2 billion and average daily volume of about 940,000 shares. This fund provides exposure to the 109 U.S. stocks that have been consistently increasing their dividend every year for at least 25 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Though the fund is slightly skewed toward the financial sector with 22.7% share, industrials, utilities, consumer staples, and materials make up for a nice mix in the portfolio with a double-digit allocation each. The fund charges 35 bps in fees per year and yields 2.51% in annual dividend. It has added 9.9% so far this year and has a Zacks ETF Rank of 2. Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY ) With the U.S. economy on a modest growth path and the spring season underway, the consumer discretionary sector is expected to get a boost. The auto industry is booming, the manufacturing industry seems to be stabilizing having ended a five-month declining streak with accelerated production and rising new orders, and the housing market is geared up for the spring buying fervor. Further, cheap financing will continue to entice consumers to buy more homes and avail auto loans, thereby propelling the stocks of this sector higher. While there are several options to play the surge in the sector, the ultra-popular XLY having AUM of $10.7 billion and average daily volume of around 8.2 million shares looks attractive. It tracks the Consumer Discretionary Select Sector Index and holds 88 securities with higher concentration on the top four firms at 30%. Other firms hold less than 4.9% share each. In terms of industrial exposure, media takes one-fourth share while specialty retail, internet retail, and hotels, restaurants & leisure round off the next three spots with a double-digit exposure each. The fund charges 14 bps in fees per year and has added 2% so far this year. It has a Zacks ETF Rank of 1. SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) A solid labor market along with affordable mortgage rates will continue to fuel growth in a recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, slower and gradual rate hikes will not impede the growth prospect of the sector, at least in the second quarter. The most popular choice in the homebuilding space, XHB, follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 5.73% share. The product focuses on mid-cap securities with 65% share, followed by 27% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of about 3.6 million shares. Expense ratio comes in at 0.35%. XHB has lost modestly 0.1% in the year-to-date timeframe and has a Zacks ETF Rank of 2. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) Treasury bonds, in particular the long-term ones, are the biggest beneficiaries of lower interest rates. The longer the duration, the more sensitive the fund is to the changes in interest rates. As such, bonds having a higher duration will experience significant gains for as long as interest rates remain low. Additionally, long-term bonds will continue to get an impetus from the negative interest rates in the other developed world like Europe and Japan that made the U.S. bonds attractive to foreign investors. Given this, the ultra-popular long-term Treasury ETF – TLT – looks exciting for the second quarter. It tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index, holding 32 securities in its basket. The fund focuses on the top credit rating bonds with average maturity of 26.61 years and effective duration of 17.77 years. It charges 15 bps in annual fees and exchanges about 8.7 million shares in hand per day. With AUM of $8.1 billion, TLT has gained 8.6% so far this year and has a Zacks ETF Rank of 2. Original Post

Do Not Be Fooled By The Commodities ETFs Surge

The commodity market has seen a surge lately, with precious metals deserving a special mention. A falling dollar in the wake of a volley of subdued U.S. data points, concerns over global growth and an acute plunge in oil prices have marred the possibility of frequent rate hikes this year. This has taken the shine off the greenback and has helped the rally in precious metals in the first quarter of 2016 (read: ETFs to Rise if Dollar Falls ). Within the entire collection, the surge in gold was unparalleled, approaching ‘the best quarter in nearly 30 years’. Gold bullion ETF iShares Gold Trust ETF (NYSEARCA: IAU ) has advanced 16.1% so far this year (as of March 31, 2016). The ETFS Physical Silver Trust ETF (NYSEARCA: SIVR ) , which looks to reflect the price of silver bullion has added 11.5% this year, followed by a 9.6% jump in the ETFS Physical Platinum Shares ETF (NYSEARCA: PPLT ) . The PowerShares DB Precious Metals ETF (NYSEARCA: DBP ) is up 15.5% so far this year (as of March 31, 2016) (read: Gold ETFs Regaining Their Glitter ). Will This Uptrend Continue? Agreed, the Fed Chair has recently hinted at a ‘cautious’ stance on future policy tightening, taking into account the downside risks emanating from global financial market upheaval. And it also lowered its number of rate hike estimates for 2016 from four to two in its March meeting, which in turn has dampened the U.S. dollar. But will the dollar trend be so glum if the U.S. economy continues to offer back-to-back upbeat economic data. This is truer in the face of improving trend seen in the labor and manufacturing sector. Meanwhile, Q4 2015 U.S. GDP was adjusted higher, from the advanced estimate of 0.7% to 1.0% in the second estimate and then finally to 1.4% in the third reading. This gives cues of positive economic development at home. Moreover, the demand-supply scenario is hardly balanced in the commodity market. The issue is especially evident in case of agricultural prices. Supply glut and lower demand has been a longstanding problem in the agro-field. However, investors should note that despite the downbeat underlying fundamentals, the Teucrium Agricultural ETF (NYSEARCA: TAGS ) rose 6% in the last one month (as of March 31, 2016). Coming to the industrial metals, investors should note that many of these are highly susceptible to Chinese economic condition. Though China’s manufacturing sector has grown surprisingly in March since July 2015, the situation is still shaky. This might put a basket of commodities like copper and nickel in a false position, going forward. Crude oil also bounced back in the middle of the first quarter on output freeze talks by major oil producers. But with several energy companies getting delisted in recent times and supplies still brimming, the road ahead for crude is definitely slippery. Keeping aside the fundamentals, profit-taking activity after such a bullish run can also cause a dip in the commodity ETFs segment. As of March 31, 2016, the relative strength index of the SPDR Gold Trust ETF ( GLD) , the PowerShares DB Precious Metals ETF ( DBP) and SIVR stood at 50.28, 51.13 and 51.93, respectively, indicating that these are nowhere near the oversold territory. So, edgy investors should have a cautious approach toward commodity investing. However, as long as global growth issues keep dominating headlines, safe haven assets like gold will likely have an upper hand. So, even if other commodities fall flat, gold ETFs have higher chances of further price appreciation if the Fed stays dovish. Link to the original post on Zacks.com