Tag Archives: zacks funds

India ETFs To Soar On Rate Cut?

The Reserve Bank of India (RBI) lowered its key rate to an over five-year low on April 5, 2016. This was the first cut in 2016 followed by four rate cuts in 2015. On Tuesday, the central bank slashed its key interest rate by 25 basis points (bps) to 6.50%, in line with the market expectations, to bolster business in the economy. The Indian stock market took giant strides in 2014 on pro-growth political changes only to lose in 2015, probably due to political deadlock. So far this year (as of April 4, 2016), most of the India ETFs are in the red, but could turn around on monetary policy easing. Not only this, the Reserve Bank of India hinted at accommodative monetary policy going forward, giving market experts reasons to see another 25 bps cut later this year, per Reuters . The move was prompted by easing inflation. Raghuram Rajan, the RBI governor, sounded hopeful of hitting the 5% inflation target for March 2017. The next target is 4.2% by March 2018. Investors who put more emphasis on slowing GDP data for the U.S. economy for the October-December quarter (7.3% followed by 7.7% growth rate in the second quarter), will now find some reason to invest in Asia’s third-largest economy. This along with stubbornly low oil prices in the global market and a relatively stable currency in the wake of a subdued greenback should propel the Indian stock market in the days to come. After all, India is heavily reliant on imports to meet its energy requirements. So, a massive drop in oil prices last year came as a boon to the economy and saved India’s significant foreign exchanges. While all India ETFs should bounce following the rate cut, below we highlight three small-cap ETFs that might get an edge over their peers. This is because small-cap stocks rebound more than the larger ones when the domestic economy picks up. These pint-sized stocks are less affected by global market turmoil than their larger counterparts. iShares MSCI India Small Cap Index Fund (BATS: SMIN ) This product provides exposure to the small cap segment of the broad Indian stock market by tracking the MSCI India Small Cap Index. Holding 236 securities in its basket, it is widely spread out across number of securities with each holding less than 1.96% of assets. Consumer discretionary takes the top spot making up for one-fifth of the portfolio, closely followed by industrials (20.4%) and financials (17.8%). The fund is unpopular and illiquid with AUM of $63.1 million and average daily volume of 17,000 shares. It charges 74 bps in annual fees from investors. The fund is down 7.7% so far this year (as of April 4, 2016). India Small-Cap Index ETF (NYSEARCA: SCIF ) This fund also targets the small cap segment and tracks the Market Vectors India Small-Cap Index. Here again, financials occupies the top position from a sector look at 28.8% while industrials and consumer discretionary round off the next two spots. The fund has so far amassed $153.8 million in its asset base while charging 89 bps in annual fees. Volume is decent exchanging more than 84,000 shares in hand a day. The fund is up 10% so far this year (as of April 4, 2016). India Small Cap ETF (NYSEARCA: SCIN ) This $19.2 million fund invests about 23% in the financial sector followed by 22.85% in the industrial sector. Technology and utilities sectors also got double-digit exposure in the fund. In total, the fund gives exposure to 74 stocks. It charges 85 bps in fees and has lost about 13.1% so far this year (as of April 4, 2016). EGShares India Infrastructure ETF (NYSEARCA: INXX ) Apart from small-cap ETFs, infrastructure stocks and ETFs will also get a boost from this move. As this sector is debt-heavy in nature, a decline in interest rates will favor it. This ETF provides exposure to 30 Indian stocks. It is pretty well spread out across components with none of the securities holding more than 5.98% of assets. With respect to sector holdings, construction & materials takes the top spot at 17.3%, followed by electricity (16.5%), mobile telecommunications (15.1%) and industrial engineering (10.6%). The product has managed assets worth $40 million and trades in volume of nearly 22,000 million shares a day. It has an expense ratio of 0.85% and has lost 2.8% so far this year (as of April 4, 2016). Original Post

Low Volatility ETFs Still In Play

Yellen’s dovish comments may be fueling a market rally at the end of one of the most volatile quarters in years, but these haven’t buried low volatility ETFs. The new-found optimism on Yellen’s hint of a ‘cautious’ rate hike trail perked up investors sentiments lately, helping U.S. bourses to score gains for two back-to-back days (as of March 30, 2016) (read: ETF Winners & Losers Following Yellen Comments ). With this, the broader market pared some of the prior losses. Among the top ETFs, investors have now seen the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) gain about 1.1%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) gain about 1.7% but the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) move down by about 2.2% year to date (as of March 30, 2016). However, the recent gains do not ensure that the market is free from risks. The Fed chair repeatedly pointed to global growth concerns and deflationary fears as downside risks to the interest rate policy. With the oil refusing to stabilize, ‘more oil producers facing delisting ‘ and growth issues still present abroad, a bear market and the consequent volatility may come down the pike anytime. Also, the U.S. earnings picture is still in shambles. Earnings estimates for the first quarter of 2016 are projected to decline 1.4%. Ruling out the impact from the energy sector, the picture looks slightly better at 1.3% decline. Even investors seem to have little faith in the Yellen rally as they are following low-volatility ETFs despite the enthusiasm in the market. The tendency can be validated by the all-time highs hit by the below-mentioned low-volatility ETFs on March 30. U.S. stocks may not be expensive, but they are not cheap either at the current level. There is also widespread fear among investors about how long this rally will hold. In such volatile times, it’s prudent for investors to follow a proper trading strategy which ensures risk-on sentiments along with stability. With that in mind, we highlight four low volatility ETFs, each of which hit all-time highs lately and could be in focus in the days to come. PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio (NYSEARCA: XRLV ) XRLV looks at 100 S&P 500 components that exhibit both low volatility and low interest rate risk. This strategy excludes stocks that perform miserably in a rising rate environment, with a tilt toward financials (23.31%), industrials (23.06%), healthcare (19.23%) and consumer staples (14.52%). The $126.2-million fund charges just 25 basis points a year in fees. However, the product is not a great choice for dividend yield. The fund yields about 1.46% annually and added 1.2% in the last five trading days (as of March 30, 2016). PowerShares S&P 500 Low Volatility Portfolio ETF (NYSEARCA: SPLV ) This $6.62 billion low volatility ETF consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the last one year. The fund is heavy on consumer staples (22.6%), financials (21.4%), industrials (16.2%), utilities (14.1%) and healthcare (13.5%). The fund charges 25 bps in fees. SPLV advanced over 1.4% in the last five trading days (as of March 30, 2016) and yields about 2.16% annually. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) The fund measures the performance of equity securities in the top 85% by market capitalization of U.S. equities that have lower absolute volatility. The fund has garnered an asset base of $11.2 billion. This fund is home to 168 securities in total and assigns double-digit allocation to the financials (20.49%), healthcare (19.22%), information technology (15.23%) and consumer staples (14.94%) sectors. The fund also has an edge over its peers when it comes to expenses as it charges a fee of just 15 basis points annually while it yields about 2.02%. The fund delivered a return of about 1.5% in the last five trading days (as of March 30, 2016). The fund has a Zacks ETF Rank #2 with a Medium risk outlook. PowerShares S&P MidCap Low Volatility ETF (NYSEARCA: XMLV ) This overlooked ETF looks to follow the S&P MidCap 400 Low Volatility Index. The product invests about $316.5 million in assets in 78 stocks. From a sector look, financials takes half of the portfolio followed by about 11.84% of assets invested in materials, 11.59% in industrials and 10.67% in utilities. The portfolio has minimal company-specific concentration risk with no product accounting for more than 1.69%. The product charges about 25 bps in fees. It was up 1.8% in the last five trading days (as of March 30, 2016). Original Post

Best Performing Bond ETFs Of Q1

Chances for the 33-year bull run in the bond market to fall flat in 2016 increased when the Fed enacted a rate hike in December 2015 after almost a decade. But in reality, bonds kept bouncing throughout the first quarter on a low-yield environment in most developed markets across the world. Thanks to China-led global market worries and the 12-year plunge in oil prices, the global market went berserk to start this year. All these buried risk-on sentiments and boosted relatively safer fixed-income securities in the quarter, pulling bond yields down. In fact, the impact of the global financial market turmoil was so deep-rooted that the Fed halved its number of rate hike estimates for 2016 from four to two in its March meeting. Also, Fed chair Yellen reaffirmed a ‘cautious’ stance on future policy tightening. Needless to say, the very move dragged down the U.S. benchmark bond yields and pushed up its prices. Notably, yields on 10-year Treasury notes dropped 41 bps to 1.83% (as of March 30, 2016) in the quarter, leading U.S. Treasury valuation to soar. Meanwhile, deflationary threats led the central banks of Japan and Eurozone to widen their already ultra-easy monetary policies. At its January-end meeting, BoJ set its key interest rate at negative 0.1%. BoJ then hinted at further cuts in interest rates if the economy fails to improve desirably. In Europe, the ECB president Mario Draghi turned super dovish in March by raising the monthly bond purchase size to EUR 80 billion from 60 billion previously. Also, ECB lowered the deposit facility rate to negative 0.4%, down from the previous rate of negative 0.3%. It also cut its main refinancing rate and marginal lending rates by 0.5% each to zero percent and 0.25%, respectively. Quite expectedly, the twin boosters of easy money policy globally and a delayed rate hike in the U.S. made fixed-income securities a winner in the first quarter. It would thus be interesting to note the ETFs that were the leaders in the bond space during the quarter. Returns are as per xtf.com . 25+ Year Zero Coupon U.S. Treasury Index Fund (NYSEARCA: ZROZ ) ZROZ follows the BofA Merrill Lynch Long US Treasury Principal STRIPS Index, which focuses on Treasury principal STRIPS that have 25 years or more remaining to final maturity. It charges just 15 basis points in expenses while the 30-day SEC yield is 2.62% currently (as of March 29, 2016). ZROZ has added 14.3% so far this year (as of March 30, 2016). The fund has a Zacks ETF Rank #2 (Buy) with a High risk outlook. DB German Bund Futures ETN (NYSEARCA: BUNL ) German bonds and the related ETFs also made an impressive rebound as these offer safety. Following extremely lower yields due to accommodative ECB policies, “German government bond yields are set to record their biggest quarterly fall in 4-1/2 years ” on March 31, 2016. The note looks to provide investors exposure to the U.S. dollar value of the returns of a German bond futures index, replicating the performance of a long position in Euro-Bund Futures. The note is up 14.3% so far this year (as of March 30, 2016). Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) The fund seeks to match the performance of the Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. This means that this benchmark zeroes in on fixed income securities that are sold at a discount to face value, and then the investor is paid the face value upon maturity. The fund charges 10 bps in fees. This Zacks Rank #2 ETF yields 2.71% annually. The fund has returned 13% so far this year (as of March 30, 2016). DB Japanese Govt Bond Futures ETN (NYSEARCA: JGBL ) Very low bond yields following Bank of Japan’s decision to push key interest rates to the negative territory to engineer the sagging economy were behind JGBL’s surge. Many analysts are of the view that ” negative bond yields are here to stay in 2016″ for Japanese bonds. The product looks to track the DB USD JGB Futures Index, which is intended to measure the performance of a long position in 10-year JGB Futures. JGBL advanced about 9.9% so far this year (as of March 30, 2016). PIMCO 15+ Year U.S. TIPS ETF ( LTPZ ) The fund tracks the BofA Merrill Lynch 15+ Year US Inflation-Linked Treasury Index and is up 9.6% so far this year (as of March 30, 2016). As U.S. inflation improved in the quarter, TIPS ETFs came into the limelight. Original Post