Japanese equities have rallied strongly over the past three months, with the widely followed Nikkei 225 adding an impressive 20.6%. However, Japan-linked equity ETFs haven’t necessarily matched this stellar performance. The NYSE-listed iShares MSCI Japan ETF (EWJ), for example, managed only 7.5%. By contrast, dollar-hedged ETFs, which hedge currency fluctuations between the dollar and yen, have kept in sync. The WisdomTree Japan Hedged Equity ETF (DXJ), for example, posted a return of 19.5%.
‘ Themes and Strategy ’
China and India are the world’s most populous nations and its principal agents of economic growth. In 2013 they are expected to grow by 8.2% and 6.0% respectively, versus 1.5% for developed economies. While both countries deserve a place in most passive long-term growth portfolios, for active ETF investors an overweight position in China in the short term, giving way to India in the longer term, could be how the smart money flows.
Nearly two-thirds of investors believe the FTSE 100 will finish 2013 higher than it did at the end of 2012, according to a survey by Barclays Stockbrokers. Almost half of respondents reckon the FTSE will close between 6,001 and 6,500 and one in seven believes it will close above 6,500 at the end of the year. For investors looking to access the FTSE, a range of exchange-traded products exists to suit varying levels of risk appetite, from conventional passive ETFs to triple-leveraged ETPs.
Declining bond yields have created the potential for a ‘bond bubble’ under which rising interest rates could result in significant losses for fixed income investors, according to Fitch Ratings. So how should investors handle this? One option is to get out of bonds altogether. But, considering the diversification role bonds play and the income they offer, this is not entirely sensible or indeed practicable. A more moderate response would be to focus on shorter-duration bonds, which are less sensitive to interest rate rises.
Despite ongoing difficulties in Europe, German corporates continue to benefit from positive underlying domestic economic fundamentals and strong demand for their goods and services globally. For investors seeking exposure to the country’s equity market, which remains attractive on both a relative and historic basis, exchange-traded funds (ETFs) benchmarked to indices such as the blue-chip DAX or the broader MSCI Germany provide targeted, liquid access for as little as 12 basis points a year.
Should the US fail to resolve its budget issues, popularly known as the “fiscal cliff”, the impact from the impasse will be felt around the world and in virtually every asset class. The superior strength of emerging market economies and the relative health of their balance sheets combined with reduced dependence on exports to the US, means emerging market fixed income, particularly in Asia, is one asset class that is well placed to manage any fallout. Fortunately for investors, emerging market debt can be accessed cheaply and efficiently via a range of exchange-traded funds (ETFs).
The recent rally in agricultural commodity prices serves as a stark reminder of the long-term global food supply/demand imbalance. For investors, however, the greatest opportunities could lie within the agribusiness sector, rather than making direct investments in agricultural commodity markets. Investors looking to access the sector have a wealth of exchange-traded funds (ETFs) to consider, with iShares, Invesco PowerShares, ETF Securities, Market Vectors, EasyETF and IndexIQ all offering compelling products.
Central banks added another 40 tonnes of gold in October, according to IMF data, with emerging market central banks once again most active in the market. Brazil and Kazakhstan were some of the largest buyers, purchasing 17.2 and 7.5 tonnes, respectively. Given the large and growing debt and fiscal issues facing both Europe and the US, central bank gold buying looks likely to persist, providing continued support to gold-backed exchange-traded commodities (ETCs), which have rallied in recent weeks.
Directors of rare earth mining giant Molycorp put their money where their mouths are last week, snapping up stock in the NYSE-listed company. This latest batch of insider buying follows August’s punchy $25m stock purchase by Chairman of the Board, Ross Bhappu. This unequivocal demonstration of faith in the company – and, by extension, the outlook for the rare earth metals industry – could point to the start of a rebound for rare earth exchange-traded funds (ETFs).
Investors who bet on income-producing shares are finding that their strategy is, literally, paying dividends, as company payouts rise to a record. Still, beware the dangers of chasing high yields, warns Indxis, a leading independent provider of bespoke indices and investment products. UK companies paid out over £23bn in dividends during the third quarter, the most on record, according to Capita Registrars, which is also forecasting total dividend payouts in 2012 of almost £80bn, followed by another record year in 2013.