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Global X Adds Emerging Markets To Scientific Beta Suite

Global X Funds is planning to add to its suite of Scientific Beta ETFs with a new fund focusing on emerging markets. According to a January 20 filing with the Securities and Exchange Commission (“SEC”), the Global X Scientific Beta Emerging Markets ETF should begin trading sometime in early April 2016, if not before. Suite of Scientific Beta ETFs Like its other Scientific Beta ETFs, Global X’s Emerging Markets ETF will track a custom index: the Scientific Beta Emerging Multi-Beta Multi-Strategy Equal Risk Contribution Index. The index’s objective is to outperform traditional market capitalization-weighted indexes, with a “limited amount of relative risk.” The index’s components are large- and mid-cap stocks that are highly liquid and trade in and are incorporated or domiciled in an emerging-market country. Index components are selected by applying four factors that have been widely recognized by academic literature to outperform over the long run: Value, Size, Low-Volatility and Momentum. Under normal circumstances, the fund will invest at least 80% of its assets in securities from the index, along with American Depository Receipts (“ADRs”) and Global Depository Receipts (“GDRs”). Global X’s other Scientific Beta ETFs launched on May 12, 2015. They include: Global X Scientific Beta US ETF (NYSEARCA: SCIU ) Global X Scientific Beta Europe ETF (NYSEARCA: SCID ) Global X Scientific Beta Japan ETF (NYSEARCA: SCIJ ) Global X Scientific Beta Asia ex-Japan ETF (NYSEARCA: SCIX ) Above Average Performance For the six months ending January 31, 2016, all four ETFs posted losses – but all four ranked in the top half of their Morningstar categories, too. SCIU and SCID posted respective six-month losses of 7.87% and 9.42%, but ranked in the top 41% and 31%, respectively, of their peers. SCIJ posted the lightest losses at 2.61% and ranked in the top 17%. And SCIX, though it nearly posted the steepest six-month losses at -9.41%, ranked in the top 1% of its Morningstar category for the period under review. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

5 Market-Beating International ETFs YTD

The worries that cropped up last year intensified with the start of this year, leading to brutal trading in stocks across the globe. This is especially true as the Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ) targeting the international equity market has lost about 5.8% from a year-to-date look compared to a loss of 5.5% for iShares MSCI ACWI Index ETF (NASDAQ: ACWI ), which targets the global stock market including the U.S. In particular, the collapse in oil price to below the 12-year lows and persistent weakness in China are the major culprits of the woeful performance. Emerging markets have been struggling while developed markets are also exhibiting slow growth amid streaks of volatility and uncertainty. The U.S. economy has also started to feel the pain of an ongoing financial instability and global growth concerns given that GDP growth came to a standstill in 2015. Notably, the global stocks had wiped out nearly $7.8 trillion in value in the first three weeks of 2016. However, the stocks rebounded at the end of the fourth week following additional stimulus hopes from the European Central Bank (ECB) to print more money and cut interest rates further. Additionally, the Bank of Japan (BoJ) propelled the stocks higher by pushing its interest rates to a negative territory. Further, oil has also gained momentum reversing some of the losses incurred in the year (read: Japan ETFs to Buy on Negative Interest Rates ). While this is true, the positive sentiments proved to be short-lived and the global stocks again started another week on a sour note. In such a weak backdrop, most of the international markets and their ETFs have been able to fight through the bearish trend and have delivered handsome returns so far this year crushing the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) . Below we have highlighted some of them: iShares MSCI Indonesia Investable Market Index Fund (NYSEARCA: EIDO ) This is the most popular ETF tracking the Indonesian market with AUM of $252.4 million and average daily volume of more than 722,000 shares. The fund tracks the MSCI Indonesia Investable Market Index, holding 87 securities in its basket while charging 64 bps in annual fees from investors. The product is somewhat concentrated on both sectors and securities. The top two firms account for at least 11% of total assets each while from a sector look financials dominates the fund’s return with more than one-third share. Consumer discretionary, telecommunication services and consumer staples round off the next three spots with a double-digit exposure each. EIDO has added 3.6% so far this year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: Believe in T Rowe Price? Invest in These EM ETFs ). iShares MSCI Thailand Capped ETF (NYSEARCA: THD ) The fund targets the Thailand equity market and tracks the MSCI Thailand IMI 25/50 Index. It has amassed nearly $218.2 million in its asset base and trades in good volume of 186,000 shares a day on average, probably ensuring no additional cost beyond the expense ratio of 0.64%. In total, the ETF holds 126 stocks, with each accounting for less than 7% share. It is somewhat concentrated from a sector perspective as financials comprises more than one-fourth of total assets while energy and industrials round off the next two spots with double-digit exposure each. The product is up 3.4% in the year-to-date timeframe and has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares MSCI Malaysia ETF (NYSEARCA: EWM ) This ETF follows the MSCI Malaysia Index and has a targeted exposure to the Malaysian stock market. Holding 43 stocks in its basket, the fund is highly concentrated on the top three firms with at least 9% share each while the other firms hold no more than 5.7% of assets. Financials dominates the fund’s return at 30.3%, followed by industrials and utilities that make up for 14.8% share each. The fund has been able to manage assets worth $217.3 million and charges 47 bps in fees per year from investors. It is heavily traded with average daily volumes of 2.21 million shares. EWM has gained 3.4% this year so far and has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares MSCI Chile Capped ETF (NYSEARCA: ECH ) This product provides exposure to 31 Chilean stocks by tracking the MSCI Chile IMI 25/50 Index. Here again, the top three firms dominate the portfolio with at least 8% share each while other firms account for less than 6.8% of assets. Further, about one-third of the portfolio is allotted toward utilities while financials and materials also receive double-digit exposure each. The ETF has accumulated $177.3 million in AUM and sees solid volume of more than 290,000 shares a day on average. Expense ratio came in at 0.64%. The fund is up 2.8% in the same period and has a Zacks ETF Rank of 3 with a Medium risk outlook. Deutsche X-trackers MSCI Mexico Hedged Equity ETF (NYSEARCA: DBMX ) This product offers exposure to the Mexican equity markets while at the same time hedges against any fall in the peso against the U.S. dollar by tracking the MSCI Mexico IMI 25/50 US Dollar Hedged Index. The fund holds 62 securities with the largest allocation to the top two firms that collectively make up for 22.9% of assets. From a sector look, consumer staples accounts for the largest share at 30.4% closely followed by financials (20.9%), telecom (14%) and industrials (13.2%). The fund has amassed $4.1 million in its asset base while trades in light volume of about 2,000 shares. It charges 50 bps in fees per year and has added 2.3% so far this year. DBMX has a Zacks Rank of 2 or ‘Buy’ rating with a Medium risk outlook. Link to the original post on Zacks.com

Japan ETFs To Buy On Negative Interest Rates

Finally, Bank of Japan (BoJ) has also followed the ECB’s suit by pushing interest rates on excess reserves into negative territory. While the investing world was expecting further monetary easing from the BoJ as the region’s growth picture is still dull and the inflationary environment is slackening substantially, hardly did any one hope for the launch of a negative interest rate. However, dissimilar to the single negative rate applied by the ECB, the Japanese central bank resorted to tiered measures exercised by the Swiss National Bank. Under this method, “the outstanding balance of each financial institution’s current account at the BoJ will be divided into three tiers , to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.” At its January-end meeting, BoJ set its benchmark interest rate at negative 0.1%, higher than ECB’s deposit rate of negative 0.3%. However, the BoJ hinted at further cuts in interest rates if the economy fails to improve desirably. Prior to this, in December 2015, Japan’s central bank announced a number of cautious changes without expanding the volume of its annual asset purchasing program it has been following for about the last three years. The bank opted for raising the Japanese government bonds’ (JGBs) average maturity from 7-10 years to 7-12 years. The bank also revealed its plan of purchasing all JGBs to be issued in 2016 and announced that it will allocate 300 billion yen of assets annually in purchasing ETFs that seek to follow the JPX-Nikkei Index 400. Reason Behind This Dovishness Investors should note that massive monetary easing to move closer to the target inflation rate of 2%, a flexible fiscal policy and structural reforms made Japan a rising star in 2013. However, the economy started to lose ground since 2014, slipping into recession in Q2 and Q3. Though the BoJ reacted to this slowdown by enhancing its asset-buying program to 80 trillion yen a year from the previous rate of 60-70 trillion yen in late October 2014, the response was not favorable. Experiencing a spurt in the first quarter of 2015, the Japanese economy shrank in Q2 and barely escaped a technical recession in Q3 (having expanded 0.3% q/q in Q3 compared with an initial reading of a 0.2% contraction). Meanwhile, consumer prices in Japan increased 0.2% y/y in December 2015, down from 0.3% growth in the previous month. The recent inflation trend shows that the level is far behind the BoJ’s goal of 2%. The central bank, on January 28, stretched out its timeline to attain the inflation goal to the first half of 2017, the third deferment in less than a year . Market Impact While this flush of liquidity gave the equities a solid boost, the Japanese yen fell against the U.S. dollar. This is true given the Fed’s policy tightening stance and the resultant ascent of the U.S. dollar. The CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) lost 2.2% in the last five trading sessions (as of January 29, 2016). This proved vital for investors seeking a Japanese flavor in their portfolio, yet looking to hedge against a falling currency. The move also lowered Japanese government bond yields boosting the Japanese government bond ETFs. The DB 3x Japanese Govt Bond Futures ETN (NYSEARCA: JGBT ) – a triple leverage JGB ETF – added 2.4% on January 29 and hit a 52-week high. Below we highlight a number of top-ranked (Zacks ETF Rank #2 (Buy) currency-hedged Japan ETFs which are likely to soar in 2016 given the supportive BoJ. WisdomTree Japan Hedged SmallCap Equity ETF (NASDAQ: DXJS ) DXJS offers exposure to the Japanese small cap stocks while at the same time provides a hedge against any fall in the Japanese yen. Since small-cap stocks better reflect the economy’s inherent strength. This ETF appears to be a strong bet in the current perspective. This is truer given the global growth worries which weighed on Japan’s export sector. The ETF charges 58 bps in fees and gained 6.6% in the last five trading sessions (as of January 29, 2016). iShares Currency Hedged MSCI Japan ETF (NYSEARCA: HEWJ ) This is another currency hedged option to play the Japanese equity and is a hedged version of the popular fund (NYSEARCA: EWJ ). The expense ratio comes in at 0.48%. The fund gained 5.9% in the last five trading sessions (as of January 29, 2016). WisdomTree Japan Hedged Dividend Growth ETF (NYSEARCA: JHDG ) The ETF follows the WisdomTree Japan Hedged Dividend Growth Index and measures the performance of dividend-paying common stocks with growth characteristics selected from the WisdomTree DEFA Index while at the same time neutralizing exposure to fluctuations between the yen and the U.S. dollar. JHDG charges 43 bps in fees and was up 6.3% in the last five trading sessions. WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) DXJ also looks to offer investors a way to gain exposure to the Japanese shares devoid of currency risks. This ultra-popular Japan ETF charges 48 bps in fees. The fund advanced 4.6% in the last five trading sessions. Original Post