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Catch These Brazil ETFs On A Rebound

With a highly charged political drama in the backdrop, the Brazil stock market has been one of the best performers this year. The benchmark Ibovespa is up 14.5% year to date (as of Mar 11, 2016). This rebound in Brazil after a disappointing 2015 can be attributed to improving commodity prices and a new round of speculations regarding a change in government. Brazil relies heavily on export to fuel its economic growth. As per data from International Monetary Fund’s World Economic Outlook Database , Brazil’s total Gross Domestic Product amounted to $3.208 trillion in 2015 out of which exports accounted for approximately 6% of the output. The country exports commodities like oil, iron, steel, soy and coffee. With oil prices stabilizing after hitting rock bottom and iron ore and soybean prices up this year, Brazilian exports look poised for a comeback (read: Can Emerging Market ETFs Sustain the Rally? ). Meanwhile, turmoil on the political front continues. Speculations that President Dilma Rousseff will be impeached were afoot after her predecessor and mentor, Luiz Inacio Lula da Silva, was taken into custody for questioning related to a corruption probe. Investors in favor of a change in government believe that new leadership could be in a better position to revive the battered economy. The Brazilian economy has been bearing the brunt of economic slowdown and an endless streak of corruption scandals for some time now. A new government could infuse a fresh lease of life into the ailing economy which otherwise is expected to contract for a second straight year in 2016. After shrinking 3.9% in 2015, the economy is expected to contract by 3.5% this year (read: Brazil Stocks, ETFs Ignore Slump: Rally on Rousseff Issues ). Apart from that, markets were also buoyed by potential rate cuts by Brazil’s central bank. Although in its meeting earlier this month, the central bank kept the benchmark Selic rate at 14.25%, several analysts are of the view that inflation would peak at around the end of the first quarter, which could lead the central bank to consider lowering interest rates later in the year. A rate cut could help boost consumer and corporate spending and bring cash to equities from safer fixed income alternative. ETFs in Focus Even though the Brazilian economy is still in shambles, early signs of a recovery can be seen. In the light of these developments we highlight four ETFs – the iShares MSCI Brazil Capped ETF (NYSEARCA: EWZ ) , the Market Vectors Brazil Small-Cap ETF (NYSEARCA: BRF ) , the iShares MSCI Brazil Small-Cap ETF (NYSEARCA: EWZS ) and the Global X Brazil Mid Cap ETF (NYSEARCA: BRAZ ) – that have jumped 30.8%, 23.9%, 26.9% and 19.6% respectively, in the last 10 days. So, investors looking to tap into this market could consider the following ETFs in the days to come. EWZ This product tracks the MSCI Brazil 25/50 Index and is the largest and most popular ETF in the space with AUM of over $2.5 billion and average daily volume of more than 19.8 million shares. It focuses mostly on large cap stocks and charges 64 bps in fees per year from investors. Holding 61 stocks in its basket, the fund is highly concentrated in its top two holdings with one-fifth of the portfolio invested in them. In terms of industrial exposure, financials dominates the fund’s return at 37.1%, followed by consumer staples (19.4%), energy (10.3%) and materials (10.7%). BRF This fund provides exposure to the small cap equities of the Brazilian market and tracks the Market Vectors Brazil Small Cap Index. The fund holds a total of 67 small cap stocks and has a total asset base of $77.3 million. The fund trades in average daily volume of 55,000 shares. The fund is well diversified with no stock holding more than 5% of weight. Among the different sectors, consumer cyclical and consumer defensive occupy the top two positions with 42% of investment made in these two categories. Market Vectors Brazil Small-Cap ETF charges a fee of 60 basis points for the investment. Investor should invest in small cap companies with caution as these are more volatile than their large cap counterparts and may prove to be weaker than large cap companies at times of global crisis. EWZS Another fund tapping the small cap companies of the Brazilian market is EWZS. The fund seeks to track the MSCI Brazil Small Cap Index. The fund has a total asset base of $19.9 million and trades in average daily volume of almost 49,000 shares. The fund holds a total of 53 stocks with none holding more than 6% weight. Among sectors, the fund has 40.4% of assets invested in consumer discretionary followed by industrials (16%) and finance (13.1%). The fund charges an expense ratio of 64 basis points. BRAZ The Brazil Mid Cap ETF has been designed to tap the mid cap market of Brazil. The fund seeks to track the Solactive Brazil Mid Cap Index. The index comprises mid-market capitalization securities of companies that are domiciled or have their main business operations in Brazil. The fund, through an asset base of $3.3 million, taps 41 stocks. The fund has average daily volume of 1,500 shares. However, BRAZ appears to be highly concentrated in the top 10 holdings with 52% of the assets invested in those securities. Among sectors, the fund has 19% invested in basic materials, thereby holding the top position in terms of sector exposure. The investors pay an expense ratio of 69 basis points for the investment made in the fund. Link to the original post on Zacks.com

Inside NANR: The Most Successful New ETF Of 2016

Oil price volatility has put energy sector ETFs in focus since the start of this year. After tumbling to a 13-year low in mid February, oil has made an impressive comeback surging nearly 47% over the past one-month period. Robust performance was driven by improving demand/supply trends, which are rebuilding investors lost confidence in the rebalancing of the oil market. This is especially true given signs of falling production in the U.S. and the Organization of the Petroleum Exporting Countries (OPEC), hopes of a deal by major oil producers to freeze oil output at the January level, receding fears of a recession in the U.S., and signs of stabilization in China and the other developed economies (see: all the energy ETFs here ). Additionally, oil drilling activity in the U.S. has fallen to the lowest level since at least 1940 reflecting that U.S. output will continue to decline in the coming weeks. A slew of capital spending cuts last year and another round of major cuts this year added to the strength and will continue to curb oil production and reduce global supply. All these suggest that the oil market might bottom out after two years of persistent decline. However, volatility persists given increasing production in Iran, a strong dollar and weak global economic growth. Given the uncertain backdrop for oil, investors are seeking well-balanced exposure to the basket of natural resources companies instead of just energy sector allocation. And this drive has made the new ETF – SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) – immense popular and successful so far this year. This fund offers exposure to the natural resources companies in the energy, materials and agriculture industries. This is because it has been getting the first-mover advantage and has accumulated $817 million in AUM in just three months of debut while surging 17.2% in the same period. Average daily volume is solid as it exchanges nearly 570,000 shares in hand (read: 5 Very Successful ETF Launches of 2015 ). Given this, it might be worth it to shed some light on this ETF and its holdings for those who are unfamiliar with the product, but are thinking about jumping in on the product. Below we highlight some of the key details regarding NANR, which made it one of the fastest-growing and most-successful ETFs of this year. NANR in Focus The ETF tracks the S&P BMI North American Natural Resources Index, charging investors 35 bps in fees and expenses. Holding 61 securities in its basket, it is highly concentrated on the top two firms – Exxon Mobil (NYSE: XOM ) and Chevron (NYSE: CVX ) – with over 9% share each. Other firms hold no more than 6.15% of assets. Materials make up for half of the portfolio, closely followed by 44.3% in energy and the rest in consumer staples. The product has a certain tilt toward large cap and value stocks as about more than two-third of the portfolio falls in the large-cap category while about half of it is classified as value picks. The combination of large-cap value securities has the potential to deliver higher returns and reduce overall volatility in the portfolio. In addition, these securities tend to outperform when considered on a long-term investment horizon and are less susceptible to trending markets. As such, these provide safety and could be the perfect choice for investors concerned about oil price volatility and its negative impact on the sector. In terms of performance, NANR has gained 15.6% year to date, easily outpacing the ultra-poplar Energy Select Sector SPDR ETF (NYSEARCA: XLE ) and the Materials Select Sector SPDR ETF (NYSEARCA: XLB ) . Investors should note that both these funds have plenty of holdings similar to NANR. Despite this, XLE and XLB are up just 3.4% and 2.3%, respectively. Link to the original article on Zacks.com

U.S. Fund Flows: Equity Funds Get Back In The Game

By Patrick Keon Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) took in over $13.2 billion of net new money during the fund-flows week ended Wednesday, March 9. All four of the fund macro-groups experienced positive net flows for the week; taxable bond funds were at the head of the table with net inflows of $5.8 billion, followed by equity funds (+$4.6 billion), money market funds (+$2.4 billion), and municipal bond funds (+$518 million). The positive flows into equity funds reversed a nine-week trend of investors pulling money out of the group. The equity markets continued their comeback during the week. After losing over 11.4% during the first six weeks of the year the S&P 500 Index recorded its fourth straight week of positive returns. The index gained back over 7.2% during this four-week timeframe, including this past week’s 0.1% appreciation. The market took strength during the week from a rally in oil prices. U.S. crude hit a three-month high ($38.51) during the week and experienced increases in seven of the last eight trading sessions. An increased demand for gas overpowered the record-high crude oil stockpiles to drive the price of oil higher. Another positive for the market was a strong jobs report as nonfarm payrolls grew by 242,000 jobs. The jobs report reinforced the belief that a recession was not in the cards for the near term and also opened the door to the possibility of more interest rate hikes by the Federal Reserve in 2016. The majority of the net inflows for taxable bond funds belonged to mutual funds (+$3.4 billion), while ETFs contributed $2.4 billion to the total. On the mutual fund side the largest net inflows belonged to funds in Lipper’s High Yield Funds classification (+$1.6 billion), while investment-grade debt categories Lipper Core Plus Bond Funds and Lipper Core Bond Funds took in $735 million and $657 million of net new money, respectively. The two largest individual net inflows for ETFs belonged to the iShares Core US Aggregate Bond (NYSEARCA: AGG ) (+$687 million) and the iShares JPMorgan USD Emerging Market Bond (NYSEARCA: EMB ) (+$528 million). ETFs (+$4.2 billion) accounted for the majority of the net inflows for equity funds for the week, while mutual funds pitched in $400 million of net new money. The largest net inflows among individual ETFs belonged to the iShares MSCI Emerging Markets (NYSEARCA: EEM ) (+$853 million) and the iShares Russell 2000 (NYSEARCA: IWM ) (+$535 million), while for mutual funds nondomestic equity funds had positive flows of $416 million and domestic equity funds suffered slight net outflows of $16 million. The week’s net inflows for municipal bond mutual funds (+$450 million) were the twenty-third consecutive weekly gains for the group. Funds in the Intermediate Muni Debt Funds (+$166 million) and General Muni Debt Funds (+$117 million) categories posted the largest net inflows for the week. The net inflows into money market funds (+$2.4 billion) marked the fourth consecutive week in which the group experienced positive flows. The group grew its coffers by over $13.3 billion during this four-week run. The largest contributors to this past week’s gains were Institutional U.S. Money Market Funds (+$7.5 billion) and Institutional U.S. Government Money Market Funds (+$2.8 billion), while Institutional U.S. Treasury Money Market Funds had net outflows of over $4.7 billion.