Tag Archives: ewg

ETF News

German ETFs Offer Good Opportunities in Rebounding European Market

1 Comment

MarketMuse update is courtesy of ETF Trends’ Todd Shriber.

Earlier this week and over the past few months, MarketMuse has been covering the rocky European market, thanks to Greece, and its recent rebound, with ETF $GVAL. Now investors have even more to be excited about with the recent success of German ETFs. 

The U.S. is not the only developed market where stocks are eying record highs. Germany’s benchmark DAX accomplished that feat Friday, climbing above 11,000 for the first time.

Exchange traded fund investors are responding, pumping massive of amounts of capital into Germany ETFs. The Recon Capital DAX Germany ETF (NasdaqGM:DAX), the only U.S.-listed DAX-tracking ETF, is up nearly 8% in the past month.

With its heavy tilt toward large, multi-national companies, the DAX index is benefiting from a depreciating euro currency. A weaker euro would help support export growth and potentially generate greater revenue from overseas operations for the multi-nationals.

A weak euro and sturdy data out of the Eurozone’s largest economy is prompting investors to put new capital to work with Germany ETFs. Through Thursday, only three ETFs have seen greater inflows than the $494.1 million added to the iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF.

One of those three is the WisdomTree Europe Hedged Equity Fund (NYSEArca:HEDJ), which allocates 26% of its weight to German stocks. No ETF has seen larger 2015 inflows than HEDJ’s $4.1 billion in new assets and the gap between HEDJ and the second-place inflows ETF, the SPDR Gold Shares (NYSEArca: GLD), is sizable at over $1.6 billion.

Thanks to the faltering euro, investors are also flocking to currency hedged Germany ETFs. After taking in $450 million on Thursday, the iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG) has added over $491 million this week. The ETF, which uses EWG with a EUR/USD hedge, had $287.4 million in assets heading into Thursday.

On a percentage basis, the Deutsche X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR) and the WisdomTree Germany Hedged Equity Fund (NasdaqGM: DXGE) have also seen significant asset growth. DXGE has more than doubled in size this year while DBGR has tripled in size since the start of 2014.

Underscoring the advantage of the euro hedge with German equities, DBGR and DXGE have both produced double-digit returns over the past month while EWG is up “just” 7.5%. Importantly, economic data supports the case for more upside for Germany ETFs,

“German gross domestic product expanded 0.7 percent in the fourth quarter, soaring past an estimate for 0.3 percent. Private consumption rose markedly in the fourth quarter, and investment developed positively, driven by a significant increase in construction output,” reports Inyoung Hwang for Bloomberg.

 

ETF News, Global Macro Strategy

Macro-Strategist Rareview: Pause in Mean Reversion

Leave a comment

rareview sbs logo Below excerpt courtesy of this a.m. edition of Rareview Macro’s “Sight Beyond Sight”
“..The call today by the professional community for a retracement of the recent weakness in Equities is very loud…

This viewpoint disregards the fact that S&P 500 futures are already 2.5% higher than Monday’s intra-day low. The key point being is that with the last price in index futures at ~1848 the market is right back at the 50% retracement of the April high (~1892) and low (~1803).

Neil Azous, Rareview Macro LLC

In our view this thought process misses the point. The real takeaway is that after weeks of instability many are finally resigned to a pause in the mean reversion of last year’s strategies. This also includes a contraction in the very high intra-day volatility. Meaning, the peak-to-trough index ranges should narrow into option expiration.

While we do not fully agree with the shift in sentiment we are mindful that the price action argues in favor of a retracement in certain strategies and we will adjust some positioning in the model portfolio to be prudent..

Firstly, the model portfolio pre-market closed out the entire short Small Cap (IWM) and long Large Cap (SPY) relative value strategy. We covered the IWM short for 112.22 and sold the SPY long at 185.36. While we still believe this is a great intermediate-term theme the fact is that we never thought we would be able to generate more than 5% of outperformance this quickly relative to when we deployed the strategy on March 19th. We will look to re-initiate this position in the near future if it were to retrace 3-4%.

Continue reading →

ETF News

ETF Fund Flow: Trumping Mutual Funds

Leave a comment

According to technology and trading firm ConvergEx Group, during the first 6 weeks of 2012, more than $8 billion has flowed in to U.S. Equity ETFs, while nearly $8 billion has “flown out” of U.S. equity mutual funds.

“Some of the commentary surrounding these products has made them sound like the hoof beats which precede the Four Horsemen of the Apocalypse,”  said Nicholas Colas, ConvergEx’s Chief Market Strategiest, alluding to various critiques of ETFs that have emerged over the past 18 months, notably Kauffmann Foundation reports that blamed ETFs for a dead U.S. initial public offering market, and argued huge short interest in some funds could pose systemic risk.

“If you want to understand how investment capital flows play into the year-to-date rally for risk assets, the world of exchange-traded funds is essentially your ‘One Stop Shop,’” Colas said in the note, stressing that whatever negative comments are being made about ETFs, they are a great way to gauge overall sentiment in financial markets.

“But for 2012, you can just as accurately call them the most visible source of capital to help U.S. stocks and other risk assets higher,” Colas wrote.

Most Popular Funds

As far as the individual funds that have really “Killed it” in year-to-date asset gathering this year-to-date, Colas said the ETFs that have pulled in over $1 billion include:

  • iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG)
  • iShares MSCI Emerging Markets Index Fund (NYSEArca:EEM)
  • iShares Russell 2000 Fund (NYSEArca:IWM)
  • iShares $ Investment Grade Corporate Bond Fund (NYSEArca: LQD)
  • Vanguard MSCI Emerging Markets ETF (NYSEArca:VWO)
  • Powershares QQQ (NasdaqGM QQQ)
  • SPDR Barclays High Yield Bond ETF (NYSEArca: JNK)
  • SPDR Gold Trust (NYSEArca: GLD)

Apart from the strong push into U.S. equities, Colas said emerging markets and precious metals are coming back into favor, with inflows of $9.1 billion and $2 billion, respectively.

”We’ve noticed a trend now for at least a year where investors use country-specific funds in lieu of regional products,” Colas said, singling out a number of those funds that have gathered more than $100 million dollars in new investments since the start of the year.

Among those are:

  • iShares FTSE China 25 Index Fund (NYSEArca: FXI)
  • iShares MSCI China Index Fund (NYSEArca: MCHI)
  • iShares MSCI Germany Index Fund (NYSEArca: EWG)
  • Market Vectors Russia ETF (NYSEArca: RSX)
  • iShares MSCI Chile Index Fund (NYSEArcaECH).

“I have no doubt that mutual fund flows will eventually turn positive, and we’ll have to keep an eye on this trend when it develops,” Colas said.

“But for now, exchange traded funds look to be the horse pulling the market’s proverbial cart.”