Greece’s ‘No’ Vote Means Little To These Funds
Some experts have argued that it is more about Greece’s crisis than being a Greek crisis, as it had been 5 years back. Yes, the financial world is now interconnected and no investor prefers uncertainty. The crisis will obviously impact Greece, but this time it is assessed to have limited or momentary impact on other key markets, some believe. Nonetheless, risk-averse investors may not be convinced by those beliefs. True, there are certain contradictory opinions as well. More importantly, the contradictory view has more to do with the impact on the US. According to some, uncertainty may compel the US Fed to withhold from raising rates perhaps in September. Also, the dollar may trend north. However, there are also others who cite that the US economy has limited direct exposure to the US. On that note, to make safe investments on the international zone, India and Japan may emerge as the right destinations. While funds have not enjoyed a very positive run in the first half of 2015, the Japan Stock fund category led the gains and was joined by 10 other foreign fund categories in the top 15 gainers. India had been a strong performer last year. Though the gains are not at par this year, the country has officially stated that it is “well insulated” from the Greece crisis. Before we pick the potential mutual funds from Japan and India, let’s look at Greece’s latest developments. An Overwhelming “No” On Sunday, 61% of Greece citizens voted against adopting further austerity measures offered by lenders. This poses serious questions about the economic future of the nation and whether it will continue to use the Euro. On the other hand, lenders will also have to ponder about their next move, which may have serious implications for the common currency bloc. This is in keeping with Prime Minister Tsipras’ recent statement and the position of his left-wing Syriza party. Time and again, Tsipras’ government has presented their own terms for an agreement and multiple negotiations have failed to break the deadlock. The Prime Minister has said that he would continue negotiations, backed by a fresh mandate. It is likely that he will continue to push for softer austerity measures and a renegotiation of existing terms. What Lenders May Do Leaders from the Eurozone have indicated that the immediate resumption of talks is unlikely. Now, Germany and France have asked Greece to offer serious proposals to hold fresh financial aid talks. Lenders now have to consider whether they will take extreme positions or agree to a compromise. German Chancellor Angela Merkel and French President Francois Hollande want Greece to be quick to secure a cash-for-reform deal with creditors; thereby avoiding Grexit. Say Yes to These Funds Shockwaves of the Greece vote may be felt in domestic markets and also across the world. However, foreign diversification is an important consideration for any investor. Both the Indian and Japanese stock markets did trend south following Greece’s ‘No’ vote, but they are expected to see limited effect. Japan: Keep Calm and Carry On Japan Finance Minister Taro Aso has said that Japan is prepared to respond to market developments related to the Greece crisis. Previously, he had said that declines in Japanese stocks were less likely to spread and the yen would not spike. Also, there will not be much impact even if Greece defaulted but chose to stay in the Eurozone. Reportedly, Bank of Japan officials said that the market reactions did not require emergency liquidity injection. However, the BOJ is ready to mobilize short-term funds in emergency market operations if the crisis deepens. Japan is said to have little direct connection with Greece. A Nomura economist explains that exports to and imports from Greece each are just 0.1% of Japan’s respective totals. Also, Japan’s financial institutions have just 37 billion yen worth of exposure to Greek debt, the loss of which will be easily offset by annual profits. Separately, Japan economy has enjoyed a handful of positive economic indicators this year. The Bank of Japan had noted that Japan’s economy is in a “moderate recovery trend”. The country’s benchmark Nikkei index has also soared to multi-year highs. The Rydex Japan 2x Strategy Fund (MUTF: RYJHX ) seeks to give returns that correspond to two times the performance of the fair value of the Nikkei 225 Stock Average. RYJHX invests in common stocks having market capital within the range of those listed in the index. Rydex Japan 2x Strategy H currently carries a Zacks Mutual Fund Rank #2 (Buy) . RYJHX boasts year-to-date and 1-year return of 29% and 16.5%. The 3 and 5 year annualized returns are 24% and 14.6%. The annual expense ratio of 1.54% is lower than the category average of 2.05%. There are no sales loads. The Matthews Japan Fund (MUTF: MJFOX ) invests most of its assets in preferred and common stocks of firms located in Japan. MJFOX may invest in companies of all sizes, but the adviser expects them to be mid to large-cap firms. Matthews Japan Investor currently carries a Zacks Mutual Fund Rank #1 (Strong Buy) . MJFOX boasts year-to-date and 1-year return of 23.6% and 16.1%. The 3 and 5 year annualized returns are 19.1% and 14.9%. The annual expense ratio of 1.03% is lower than the category average of 1.47%. There are no sales loads. India: “Well Insulated” from Greece Crisis Meanwhile, another potential investment destination should be India. India’s chief economic advisor Arvind Subramanian said: “This is a drama which is going to play out for some time. We are well protected in at least three ways: Our macro-economic situation is more stable. We have (forex) reserves. We are an economy which is still an attractive investment destination”. The minor direct linkage with Greece will let India escape with little impact. The only impact may be momentary. What may happen is growing risk aversion toward emerging markets may curtail some fund flow to the Indian market for the short term. However, it remains a market with low exposure and instead, Indian equities or funds will now provide a good buying opportunity. The Matthews India Fund (MUTF: MINDX ) seeks long-term capital growth. MINDX invests majority of its assets in stocks and convertible securities of firms based in India. Though MINDX invests in companies of all sizes, the adviser expects MINDX to invest in mid to large-cap companies. Matthews India Investor currently holds a Zacks Mutual Fund Rank #1. MINDX boasts year-to-date and 1-year return of 7.6% and 25.8%. The 3 and 5 year annualized returns are 24% and 10.7%. The annual expense ratio of 1.12% is lower than the category average of 1.76%. There are no sales load. The Eaton Vance Greater India Fund (MUTF: ETGIX ) seeks long term capital growth. ETGIX invests most of its assets in Indian equities and companies surrounding India. A minimum 50% of its assets are parked in Indian companies. ETGIX invests a maximum 5% of its assets in companies situated in countries other than India, Pakistan or Sri Lanka. Eaton Vance Greater India A currently holds a Zacks Mutual Fund Rank #1. ETGIX boasts year-to-date and 1-year return of 6.4% and 14.5%. The 3 and 5 year annualized returns are 16.2% and 4.8%. The annual expense ratio of 1.88% is however higher than the category average of 1.76%. ETGIX carries a front end sales load of 5.75%. Link to the original article on Zacks.com