Tag Archives: etf trends

ETF Investors Have Regret Following the Swiss National Bank’s Announcement

MarketMuse update courtesy of Tom Lydon from ETF Trends. This update acts as a follow up from one of yesterday’s posts.

Thursday’s biggest financial market headlines came courtesy of the Swiss National Bank (SNB), which opted to drop the franc’s peg to the euro, a move that sent the Swiss currency soaring and Swiss stocks to one of their worst one-day performances on record.

The CurrencyShares Swiss Franc Trust (NYSEArca: FXF) easily Thursday’s top performing non-leveraged ETF with a gain of over 17% on volume that was nearly 34 times trailing three-month daily average. SNB’s decision to do away with the franc’s euro peg was a surprise, particularly because it conflicted with recent rhetoric from the central bank, which indicated SNB was looking to defend the EUR/CHF peg.

Forex traders and ETF investors alike were caught off-guard.

“Data from the Commodity Futures Trading Commission released on Friday showed net short positions of 24,171 contracts on the Swiss franc, the largest since June 2013. Adding in 662 short option contracts gives a combined position of 24,833 contracts or $3.5 billion at the current rate of around 0.90 franc to the dollar,” according to Reuters.

Regarding ETFs, the iShares MSCI Switzerland Capped ETF (NYSEArca: EWL), the largest U.S.-listed Switzerland ETF, lost almost $27 million in assets since the start of 2015 heading into Thursday while FXF was light by almost $5 million. The First Trust Switzerland AlphaDEX Fund (NYSEArca: FSZ), a smart beta spin on Switzerland ETFs, had not lost or taken in any money since the start of the new year.

Those numbers are not staggering, but fourth-quarter outflows from Switzerland ETF paint a better picture of investors missing out on Thursday’s Swissie surge. In the last three months of 2014, investors pulled nearly $198 million from EWL and $113.5 million from FSZ.

With gold prices languishing and the dollar surging, investors also did not stick around to wait for a franc rally and pulled almost $10 million from FXF. Of course it is with the benefit of hindsight and few if any traders could see a 17% one-day move coming for a currency ETF, but investors that left equity-based Switzerland ETFs missed out on EWL surging nearly 4% and FSZ climbing 3.7% Thursday.

Some former gold ETF investors also missed. The SPDR Gold Shares (NYSEArca:GLD) lost $3.2 billion in assets last year and has bled another $115 million to start 2015, but a sustained rally by the franc could ameliorate that situation.

On Thursday, GLD, the world’s largest gold ETF, climbed 2.5% on more than double the average daily volume to reclaim its 200-day moving average for the first time since September.

For the original article from ETF Trends, click here.

Issuers Get Pickier Over Which ETFs to Launch

MarketMuse update courtesy of ETF Trends’ Tom Lydon.  

In 2014, just over 200 new exchange traded products launched in the U.S., more than double the nearly 90 that closed, but even with launches continuing to easily outpace closures, some major ETF issuers are getting choosy about the new number of rookie products they bring to market.

For example, BlackRock (NYSE: BLK), the parent company of iShares, the world’s largest ETF sponsor, launched 29 new ETFs in 2014, a number that matches the ETFs shuttered by the firm, reports Victor Reklaitis for MarketWatch.

The bulk of iShares’ closures came by way of an August announcement declaring 18 closures. Ten of those 18 ETFs, all of which ceased trading in mid-October, were target date funds. In early 2014, iShares announced the closure of 10 ex-U.S. sector ETFs.

Some of the more successful ETFs launched by iShares last year include the $146.1 million iShares Core Dividend Growth ETF (NYSEArca: DGRO), the $206.2 millioniShares Core MSCI Europe ETF (NYSEArca: IEUR) and the $140.3 million iShares MSCI ACWI Low Carbon Target ETF (NYSEArca: CRBN).

Increased selectivity by issuers when it comes bring new ETFs could become a more prominent theme as the battle for investors’ assets intensifies. Simply put, many new ETFs struggle out of the gates and go months if not years with nary a glance from advisors and investors. As of late December, 92 of the ETFs launched last year had over $10 million in assets under management and none of 2014’s crop of new ETFs came within spitting distance of the over $1 billion accumulated by the First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV). FV debuted last March and by November had over $1 billion in assets

There are more than 7,500 U.S. open-end mutual funds, MarketWatch reports, citing Morningstar data, implying there is room for the U.S. ETF industry to grow from the current area of about 1,700 products.

One thing is clear: Different issuers are taking different approaches to new ETFs. For example, Vanguard, the third-largest U.S. ETF issuer, did not bring a new ETF to market in 2014 but still managed to add $75.3 billion in new ETF assets, a total surpassed only by iShares. Earlier this month, Pennsylvania-based Vanguard said it expects to launch its first municipal bond ETF early in the second quarter.

First Trust, one of the fastest-growing U.S. ETF sponsors, launched 15 new products last year, including FV.

For the original article from ETF Trends, click here.

 

Philippines Has Rising Star in the ETFs Market

MarketMuse update courtesy of ETF Trends’ Todd Shriber.

After finishing lower for a second consecutive year in 2014, diversified emerging markets exchange traded funds are off to decent though not spectacular starts in 2015.

Off to a more impressive start than broader peers, such as the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), is the iShares MSCI Philippines ETF (NYSEArca: EPHE). EPHE, the lone Philippines ETF, entered Friday with a 2015 gain of 2.6%, or nearly quadruple that of VWO.

In 2014, EPHE gained more than 22% while EEM and VWO each finished the year in the red. EPHE now resides less than 10% below its all-time high set in January 2013 and more gains could be on the way after stocks in Manila rose to a record during Friday’s Asian session.

Like India, the Philippines is getting a significant economic boost from lower oil prices because the Philippines is dependent on oil imports to help power one of Southeast Asia’s fastest-growing economies. Over the past six months, the U.S. Oil Fund (NYSEArca: USO) has plunged 51%, but the WisdomTree India Earnings Fund (NYSEArca: EPI) and EPHE have traded modestly higher over that period.

Investors are paying up to be involved with Philippine equities.

“Shares in the Philippine Stock Exchange Index are valued at 18.4 times 12-month estimated earnings, the highest since Nov. 26. The gauge has the highest multiple among Asia’s benchmark equity indexes,” reports Michael Patterson for Bloomberg.

The MSCI Emerging Markets Index trades at about 11 times earnings, but that did not prevent EPHE from hauling in $44.3 million in new assets last year. That is nearly 12% of the ETF’s current assets under management, indicating U.S. investors remain underweight Philippine equities. That may not be the case for long.

“The Taiwanese, Philippine and South Korean stock markets also warrant over-emphases on account of their stable political regimes, reliable policymaking climates and healthy economic prognoses,” said S&P Capital IQ.

For 2015, Morgan Stanley “said the Philippines was the best-positioned market due to its ample liquidity, strong forecast gross domestic product growth and low levels of credit penetration,” reports The Star.

A stronger U.S. dollar is helping Philippine stocks beyond lower oil prices. Foreign remittances are now worth more when converted into pesos, helping boost the local economy. EPHE allocates nearly 12% of its weight to consumer sectors.

In fact, the Philippines has already issued dollar-denominated bonds this year, becoming the first emerging market to do so. The Philippines can afford to do that because its external funding costs are low relative to other developing economies and the country has an investment-grade rating from all three major ratings agencies.

For the original article by Todd Shriber from ETF Trends, click here.

Vanguard Files For The Company’s First Muni Bond ETF

MarketMuse update courtesy of ETF Trends’ Tom Lydon’s 6 January story.

Vanguard, the third-largest U.S. issuer of exchange traded funds, has filed plans with the Securities and Exchange Commission to introduce the firm’s municipal bond ETF.

The Vanguard Tax-Exempt Bond Index Fund will be the firm’s first tax-exempt index fund and ETF. Pennsylvania-based Vanguard already has a substantial municipal bond footprint with about $140 billion in tax-exempt bond and money market funds, according to a statement issued by the firm.

Vanguard offers 12 actively managed municipal bond funds (five national, seven state-specific) and six tax-exempt money market funds (one national, five state-specific), according to the statement.

The Vanguard Tax-Exempt Bond Index Fund is expected to debut in the second quarter with three share classes – Investor Shares, Admiral Shares and ETF. The new ETF will have an annual expense ratio of 0.12%, well below the average annual fee of 0.49% on municipal bond ETFs, said Vanguard, citing Lipper data.

The statement did not include a ticker for the new ETF.

“For investors in high tax brackets, a high-quality, broadly diversified municipal bond fund or ETF can provide tax advantages as well as diversification from the risks of the equity market,” said Vanguard CEO Bill McNabb in the statement. “Vanguard is pleased to bring a low-cost index option to the municipal category as a complement to our lineup of low-cost actively managed tax-exempt bond funds.”

That jibes with Vanguard’s reputation for being one of the low-cost leaders in the ETF space. In December, Vanguard lowered fees on 12 of its equity-based ETFs, including 10 sector funds, moving the issuer into a tie with Fidelity for the least expensive sector ETFs.

Vanguard currently sponsors 13 fixed income ETFs, including the behemoth VanguardTotal Bond Market ETF (NYSEArca: BND). Home to nearly $24 billion in assets under management, BND was one of 2014’s top asset-gathering ETFs. Other Vanguard bond ETFs include the Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) and the Vanguard Total International Bond ETF (NYSEArca: BNDX), two last year’s top performing bond funds.

Last year, investors poured a record $215.5 billion into Vanguard funds, including $75.3 billion into Vanguard ETFs. Including BND, four Vanguard ETFs were among the top 10 asset-gathering ETFs in 2014.

For the original story in ETF Trends, click here.

 

The US’s Deep Freeze Gives Temporary Boost to Natural Gas ETFs

MarktMuse update courtesy of extract from ETF Trends’ Tom Lydon.

After natural gas futures dipped below $3 for the first time in two years, the commodity and related exchange traded funds are warming up on cold weather next week, but any gains may be brief as temperatures could remain above normal for the rest of the month.

The United States Natural Gas Fund (NYSEArca: UNG) was up 1.4% Friday whileiPath Dow Jones-UBS Natural Gas Total Return Sub-Index ETN (NYSEArca: GAZ)was 1.0% higher. Over the past year, UNG declined 28.6% while GAZ fell 20.2%.

NYMEX natural gas futures surged in early trading Friday but settled just shy of $3 per million British thermal units.

Natural gas futures were heating up from a 27-month low on speculation that a cold snap could stoke demand for  heating fuel next week. According to Commodity Weather Group, “a sizable chunk of arctic air” will cover the Midwest, South and East next week, reports Naureen S. Malik for Bloomberg.

However, while temperatures will drop next week, the weather will likely warm up and continue to weigh on natural gas prices after next week.

While the cold outbreak “is occurring on the anniversary of last year’s polar vortex big event, we do not expect it to reach those levels,” Matt Rogers, president of Commodity Weather, said in a note. “The other big story is the warmer pattern shift for the 11-15 day,” raising temperatures up to seasonal norms across most of the lower 48 states from January 12 to 16.

Additionally, supply remains robust due to new hydraulic fracturing techniques in shale oil beds, further weighing on natural gas prices through the season.

“We don’t look for this rally to carry above the $3 mark in today’s session despite some possible cold updates to the temperature views,” energy-advisory firm Ritterbusch & Associates said, the Wall Street Journal reports. “Production has been running at a near-record clip.”

For Lydon’s full article on ETF Trends, click here.

Winklevoss Twins’ Bitcoin Trust ETF Makes Progress to go Public

MarketMuse update courtesy of extracts from Tom Lydon’s 31 December ETF Trends story.

The Winklevoss twins, Cameron and Tyler, famed for suing Mark Zuckerburg, claiming he stole Facebook from their own social networking site ConncetU, have started another new venture.  In April 2013, they claimed that they owned of 1% of all Bitcoins in existence. The Winklevoss twins now prepare to sell their Bitcoin shares on the Nasdaq.

Slowly but surely, Cameron and Tyler Winklevoss’ Bitcoin Trust is putting the final touches on its proposed cryptocurrency-backed exchange traded fund, filing for shares on the Nasdaq.

On Wednesday, the Bitcoin Trust filed with the Securities and Exchange Commission to sell 20.1 million shares on the Nasdaq exchange, reports Ciara Linnane for MarketWatch. The filing did not include a launch date or expense ratio, indicating the Bitcoin Trust is not close to coming to market.

In May, a regulatory filing revealed the Winkelvoss Bitcoin Trust will trade on the Nasdaq. In July, a Form S-1 filing with the Securities and Exchange Commission reveled the ETF, assuming it comes to life, would trade under the ticker “COIN.”

“The investment objective of the Trust is for the Shares to reflect the performance of the price of Bitcoins, as measured by Winkdex, less the expenses of the Trust’s operations,” according to the SEC filing.

The brothers have also introduced the bitcoin index, or so-called Winkdex, which will also be used to price the value of assets held by the Winklevoss Bitcoin Trust.

The trust’s sponsor is Math-Based Asset Services LLC, which was formed in mid-2013. The company will run the new benchmark, tracking bitcoin prices based on “qualified bitcoin exchange transaction data… over a trailing two-hour period,” according to the SEC filing.

Bitcoin is one of the more popular digital currencies available. The cryptocurrency can be stored and traded electronically. The currency is stored in a digital wallet and is traded through a downloadable software or through a third party provider. The main thing traders should understand is that the Bitcoin is itself is considered a form of currency and not just an online service to transfer U.S. dollars.

Many users utilize the currency because the bitcoin is decentralized – there is no central bank issuing or monitoring the currency. Every transaction is validated by a Bitcoin miner – miners are entities within the Bitcoin network that validate the transaction by solving a mathematical proof. This system prevents double counting of Bitcoins and keeps a record of all transactions.

Bitcoin prices have gained widespread attention when the value of the currency skyrocketed above $1,000. However, the cryptocurrency has stumbled in 2014, declining 58.7% year-to-date to about $315.

For Lydon’s original article from ETF Trends, click here.

European ETFs Look Promising for 2015

MarketMuse update courtesy of extract from ETF Trends’ Tom Lydon.

European equities and related exchange traded funds could outperform in 2015, capitalizing on lower energy prices, an improved export outlook and potentially more European Central Bank easing.

For instance, the iShares MSCI EMU ETF (NYSEArca: EZU) and the SPDR EURO STOXX 50 (NYSEArca: FEZ) both focus on Eurozone countries.

Alternatively, investors seeking to capture Eurzone market exposure can also consider a hedged-equity ETF that will help diminish the negative effects of a depreciating euro currency. For example, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU)and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) hedge against the euro currency and would outperform a non-hedged Europe equity ETF if the euro currency continues to depreciate.

DBEU, though, takes a slightly broader approach to the European markets, including about a 40% combined tilt toward the United Kingdom and Switzerland. HEZU and HEDJ only cover Eurozone member states.

Wall Street analysts believe that European equities could be one of the best places to invest in 2015, reports Sara Sjolin for MarketWatch.

“Europe was a market ‘darling’ this time last year, then became a pariah,” economists at Morgan Stanley said in a research note. “[Now] we like European equities, (especially cyclicals) and European ABS.”

Mislav Matejka, chief European equity strategist at J.P. Morgan, even predicts that Eurozone stocks could outperform U.S. equities next year.

Specifically, the investment banks are pointing to three factors that will support the region: the ECB, a cheap euro currency and low oil prices.

ECB President Mario Draghi has hinted that the central bank could introduce further stimulus in early 2015 and even enact a bond purchasing program.

“The mantra is ‘Don’t fight the ECB’ — the central bank is set to inject €1,000 billion and to add sovereign bonds to its buying program,” analysts at Société Générale said in a research note.

While the euro currency has depreciated 10% against the U.S. dollar so far, analysts believe there is more room to fall after the ECB enacts further easing. Consequently, the weak euro will help bolster the Eurozone’s large exporting industry, making goods cheaper for foreign buyers. Morgan Stanley predicts the cheap currency could add at least 2% to earnings per share for European companies next year.

Lastly, lower energy prices will have an immediate effect on consumers, allowing Europeans to spread around their cash for discretionary purchases and spur growth. Additionally, the cheap oil will lower input costs for companies’ profit margins and lift earnings.

Furthermore, analysts believe that if the ECB begins a quantitative easing plan, the financial sector will be a key beneficiary. Most major Eurozone banks are already in good shape and should capitalize on improved credit supply and loan demand. For targeted Europe financial exposure, investors can take a look at the iShares MSCI Europe Financials ETF (NYSEArca: EUFN). However, the ETF does not hedge against currency risks.

 

 

 

ETF Trends: Central Banks “Bid-On” ETFs

etftrends logo imagesCourtesy of Tom Lydon

Central bankers are planning on continuing to boost equity exposure via exchange traded funds. The Bank of Japan, among many others, plans to double exposure to stock ETFs over the course of the year, as falling bond yields disappoint.

Central bankers around the world have been putting direct investments into equity markets. This accounts for about $11 trillion in foreign exchange reserves, reports ETF Guide. A survey taken last month of 60 central bankers revealed that about 23% of them expect to raise their level of stock exposure, according to the Royal Bank of Scotland Group.

For example, The Bank of Japan, second-largest holder of reserves, plans on doubling investment into the iShares MSCI Japan ETF (NYSEArca: EWJ) to 3.5 trillion yen, equal to $35.2 billion, by 2014. In addition to the exchange traded fund purchase,  the BOJ will also buy Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of about 1 trillion yen and about 30 billion yen respectively.

Other central bankers that are hot on equities include the Bank of Israel, Czech National Bank and Swiss National Bank. All three have already raised equity exposure to about 10% of reserves so far.

For the full story courtesy of ETF Trends, please click here

ETFs Spike Above 30% of Market Trading as Euro Fears Return: ETF Trends

etftrends logo imagesCourtesy of John Spence, ETF Trends

The percentage of ETF trading relative to overall volume tends to shoot higher in headline-driven markets when asset classes are moving together on macroeconomic or political events.

That’s exactly what happened on Monday when global markets swooned on fears parliamentary elections in Italy will result in political gridlock. After months of simmering on the back burner, Europe’s debt crisis roared back into the news. [Italy ETF Swings Lower on Berlusconi, Election]

On Monday, ETFs accounted for 32% of overall dollar volume, and there have been multiple sessions in the past week when the share rose above 30%, says Chris Hempstead, director of ETF execution services at WallachBeth Capital.

Chris Hempstead WallachBeth Sep 2012 321
Chris Hempstead, WallachBeth Capital

“It’s rare when ETF volume goes above 30%,” he said in a telephone interview Tuesday morning.

Hempstead said he has seen the figure approach 40% on some days during the past few years.

“ETF trading spikes when people think events are highly correlated and macro in nature,” he noted. “When stock pickers are having a tough time and market correlations rise, that’s when we see the ETF percentage of overall volume start to creep up.”

For example, trading volume in volatility-linked ETFs soared in Monday’s risk-off attack as investors looked for shelter and hedges. The CBOE Volatility Index has jumped 54% in a week. [Volatility ETF Trading Surges on Market Jitters, VIX]

“When the percentage of ETF trading in markets pops, a lot of it is people putting on trades to hedge bets. It’s not buy-and-hold,” Hempstead said. Continue reading

Markdown in MuniBond ETFs: Discount Pricing

ETF Trends’ Tom Lydon makes a poignant observation when pointing out that MUB , iShares S&P National Municipal Bond Fund ETF is continuing to trade at a discount to its NAV, which for some, is a disturbing bearish signal.

While ETF “discount trading” is not necessarily unusual in and of itself, prolonged disparities (i.e. for more than a brief snapshot in time) often infers a bearish sentiment.  When counting the growing number of municipalities raising their hands for more help and the loom of local financial crisis episodes remains large, its no wonder that the bears are growling.

That said, Ron Quigley, head of fixed income syndicate for Mischler Financial Group was alone last week when he said:        “.. The Federal Reserve Bank said today they’d leave rates at “current low levels through 2014” which simply means that as the economy grows and inflationary fears increase, the long end of the curve will rise.  A steeper yield curve will expedite the process by which the banking system recapitalizes, thus encouraging banks to deploy their excess capital and profits into even more SMEs and consumer lending to fuel more growth

Whichever economic analyst camp you prefer to reside in, MUB’s technical chart is decidedly bearish at the moment. Click on the image to read Tom Lydon’s perspective.

Chart Courtesy of ETF Trends