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Pacific Funds In Focus On Trans Pacific Partnership Deal

After hectic negotiations for half a decade, the contentious Trans Pacific Partnership (TPP) was secured by the U.S. and 11 other countries. This is the biggest trade agreement in history aimed at reducing tariffs and setting common trading standards for the 12 Pacific Rim nations, including the U.S., Canada, Japan, Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement will thus widen the horizons of trade in the Pacific region. TPP will cut tariffs and create common standards for all 12 member countries. On first look, these measures look promising enough to boost the business environment of the Pacific or related countries. For example, the deal will create new opportunities for companies in Pacific regions while providing adequate protection for U.S. manufacturers. While it helps the companies and the stock performances, the funds should look to benefit too. However, the TPP is not without controversies and opposition. US Democratic presidential hopeful Hillary Clinton is against the trade deal and said the proposed pact does not address currency manipulation. The deal puts Pacific funds under the spotlight, which are hoping to rebound from the negative territory. The funds are favorably-ranked but the market concerns this year had dragged them to the red too. Positive impact of the TPP, which will lower trade barriers around the Pacific and boost export-heavy markets, will be a welcome factor for the Pacific mutual funds. A Look into TPP Deal Currently, TPP member nations represent about 40% of global GDP and 30% of global trade. The deal will open up trading avenues for key export products of Vietnam such as textile, garment, footwear, and seafood in broader market such as the U.S., Japan, and Canada due to their ultra low import tariffs. An argument in favor of the TPP deal is that it will expand U.S. exports and create higher-paying jobs. On the other hand though, there may be an outflow of American jobs to overseas economies. There is also uncertainty about why the exact wording of the TPP was kept relatively secret during negotiations. As the TPP reaches the Congress for approval, it will witness apprehensions from both parties. The Congress may thus take months to deliberate. Meanwhile, the public will also get a minimum of two months to review the content of the deal before Congress decides on its approval. Talking of apprehensions, presidential hopeful Hillary Clinton commented: I have been trying to learn as much as I can about the agreement…But I’m worried. I’m worried about currency manipulation not being part of the agreement. We’ve lost American jobs to the manipulations that countries, particularly in Asia, have engaged in. I’m worried the pharmaceutical companies may have gotten more benefits – and patients and consumers fewer. I think there are still a lot of unanswered questions. On a separate note, it was interesting to find out the absence of China. It is a prominent country in the Pacific Rim, but the second largest economy and the world’s largest exporter was not part of the proposed pact. Though some believe that China will join in later, but for now this is an opportunity for others to grab a share of China’s export market. 3 Pacific Mutual Funds to Buy Below we highlight three Pacific – Equity mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. Also, the funds have encouraging 3- and 5-year annualized returns. The minimum initial investment is within $5,000. The Guinness Atkinson Asia Pacific Dividend Builder Fund (MUTF: GAADX ) invests heavily in dividend generating equity securities issued by companies form the Asia Pacific region. Common and preferred stocks, related convertible securities, rights and warrants constitute GAADX’s major investments. Guinness Atkinson Asia Pacific Dividend carries a Zacks Mutual Fund Rank #2. Over 1-year period, GAADX has gained 4.3%. The respective 3- and 5-year annualized returns are 4.9% and 4.1%. GAADX carries no sales load. The Fidelity Pacific Basin Fund (MUTF: FPBFX ) seeks to achieve long-term capital appreciation by investing a major portion of its assets in securities of issuers located or are economically tied to Pacific Basin. FPBFX generally invests in common stocks of companies located across a wide range of Pacific Basin countries. Factors such as financial strength and economic condition are considered before investing in a company. Fidelity Pacific Basin carries a Zacks Mutual Fund Rank #1. Over 1-year period, FPBFX has gained 5.2%. The respective 3- and 5-year annualized returns are 11.3% and 7.6%. FPBFX carries no sales load, and annual expense ratio of 1.18% is lower than the category average of 1.33%. Wells Fargo Advantage Asia Pacific Fund (MUTF: SASPX ) seeks capital growth over the long run. SASPX allocates a lion’s share of its assets in equities of companies located in Asia Pacific Basin. SASPX emphasizes on factors including earnings growth, financial condition and management efficiency for selecting companies. SASPX may also invest in participation notes. Wells Fargo Advantage Asia Pacific Investor carries a Zacks Mutual Fund Rank #2. Over 1-year period, SASPX has gained 3.5%. The respective 3- and 5-year annualized returns are 8% and 5.2%. SASPX carries no sales load. Link to the original post on Zacks.com

Global Infrastructure Investments

By Todd Rosenbluth Once every four years, America’s civil engineers provide a comprehensive assessment of the nation’s major infrastructure categories. The latest report card has a poor cumulative GPA for infrastructure of D+, with rail and bridges each earning a C+. While Congress continues to debate whether, and how, to fund the projects to improve the quality of the nation’s backbone, there has been some encouraging news at the state level. Nearly one-third of U.S. states, including Georgia, Idaho and Iowa, are addressing infrastructure investment through gasoline tax increases to support improvement of local roads and bridges. Indeed, nearly two-thirds of the assets inside the S&P Global Infrastructure index are domiciled outside of the U.S., with China (5%), Japan (4%), Italy (8%), Spain (5%), and the United Kingdom (7%) among the ten largest countries. The S&P Global Infrastructure index seeks to provide broad-based exposure to infrastructure through energy, transportation, and utility companies in both developed and emerging markets. S&P Capital IQ Equity Analyst Jim Corridore thinks that companies that construct infrastructure are likely to see increased demand over the next several years due to the need for upgrade and expansion of infrastructure both within the U.S. and around the world. Within the U.S., aging and outdated roads, electric transmission grids, and energy transmission facilities are in dire need of repair and replacement, according to Corridore. Meanwhile pipelines, water treatment, and rail are seeing increased demand and need for expansion. From an industry perspective, transportation infrastructure (40% of assets) are well represented in the global infrastructure index, but this is partially offset by stakes in electric utilities (22%) and oil, gas & consumable fuels (20%) companies. Holdings include Kinder Morgan (NYSE: KMI ), National Grid (NYSE: NGG ) and Transurban Group ( OTCPK:TRAUF ). The S&P Global Infrastructure index generated a 9.6% annualized return in the three-year period ended July 2015. However, given the strength in the US dollar relative to most currencies in the last three years, many currency hedged international approaches have outperformed those that hold just the local shares. This is one of those examples, where the currency neutralized infrastructure index was even stronger with a 13.0% three-year return. On a calendar year basis, the hedged index outperformed in 2013 and 2014, after underperforming in 2012. Meanwhile, from a risk perspective the three-year standard deviation for the hedged S&P Global Infrastructure index was 20% lower. S&P Capital IQ thinks that global infrastructure needs has created some investment opportunities. However, we think investors need to be mindful of the impact currencies can play. There are four ETFs that offer global infrastructure exposure and 39 non-institutional mutual fund share classes. Disclosure: ©S&P Dow Jones Indices LLC 2015. Indexology® is a trademark of S&P Dow Jones Indices LLC (SPDJI). S&P® is a trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a trademark of Dow Jones Trademark Holdings LLC, and those marks have been licensed to S&P DJI. This material is reproduced with the prior written consent of S&P DJI. For more information on S&P DJI and to see our full disclaimer, visit www.spdji.com/terms-of-use .

Things Are Getting Junky For Brazil ETFs

S&P’s decision to place a non-investment grade rating on Brazil comes as the country is mired in a recession. With Brazil being one of the developing world’s most prolific issuers of sovereign and corporate debt, some emerging markets bond funds could also be stung by news of the downgrade. A month ago, global investors cheered when S&P rival Moody’s Investors Service did not place a negative outlook on Brazilian bonds. By Todd Shriber, The ETF Professor The iShares MSCI Brazil Capped ETF (NYSEARCA: EWZ ) closed modestly lower Wednesday, finishing the day a mere $0.50 off its most recent low, which is a more than 10-year low. Thursday could bring more glum price action for EWZ and other Brazil ETFs because Standard & Poor’s downgraded Brazil’s sovereign credit rating to BB+ from BBB- after the close of U.S. markets Wednesday, becoming the first of the major ratings agencies to slap a junk rating on Latin America’s largest economy. S&P may not be done downgrading Brazilian debt. “The negative outlook reflects what we believe is a greater than one-in-three likelihood of a further downgrade due to a further deterioration of Brazil’s fiscal position, potential key policy reversals given the fluid political dynamics, including a further lack of cohesion within the president’s cabinet,” said the ratings agency in a statement . In late July, S&P revised its outlook on Brazil’s sovereign credit rating to negative from stable, a move that served as a harbinger for the downgrade to junk territory. One Of Many Problems S&P’s decision to place a non-investment grade rating on Brazil comes as the country is mired in a recession with President Dilma Rousseff’s administration ensconced so deeply in corruption controversy that Brazil’s benchmark Bovespa has bled so much market value that Mexico could usurp its southern rival for the title of Latin America’s largest equity market . “We believe Brazil’s credit profile has weakened further since July 28, when we revised the outlook on Brazil to negative. At that time, we signaled increased execution risks to the corrective policy changes already underway, mainly stemming from fluid political dynamics in Congress associated with spillover effects from investigations of corruption at state-owned energy company Petrobras. We now perceive less conviction within the president’s cabinet on fiscal policy,” said S&P. EWZ entered Thursday with a year-to-date loss of 34.6 percent, by far the worst performance among the four major single-country ETFs tracking BRIC nations and more than 2 1/2 times worse than the comparable China and India ETFs. With Brazil being one of the developing world’s most prolific issuers of sovereign and corporate debt, some well-known emerging markets bond funds could also be stung by news of the S&P downgrade. For example, the $1.2 billion Market Vectors Emerging Markets Local Currency Bond ETF (NYSEARCA: EMLC ) allocates 8.4 percent of its weight to real-denominated debt, making Brazil the fund’s third-largest country weight. EMLC is in the midst of an eventful week. The ETF tracks a JPMorgan Chase & Co. index and earlier this week, the bank decided to remove Nigeria from its emerging markets bond benchmarks. EMLC allocated 3.1 percent of its weight to Nigerian debt . The Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB ) has an 8.5 percent to Brazilian debt, also making the nation that fund’s third-largest country exposure . VWOB is only down 1.55 percent year-to-date, something of a minor miracle when considering the ETF’s exposure to debt issued by emerging and frontier markets that are either in recessions, have devalued their currencies or both. “Indeed, we continue to believe that economic weakness exacerbates execution risk. We now expect the contraction in real GDP to be deeper and longer, with another revision to our growth outlook. Our projections estimate a contraction of about 2.5 percent this year followed by another 0.5 percent contraction in 2016, before returning to modest growth in 2017,” adds S&P. A month ago, global investors cheered when S&P rival Moody’s Investors Service did not place a negative outlook on Brazilian bonds, though the ratings agency downgraded Brazil’s sovereign credit rating to Baa3, the ratings agency’s lowest investment grade. Fitch Ratings has a BBB rating on Brazilian debt, which is two notches above junk. 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.