ETF Assets Alive And Growing

Although the news seems plagued by negativity, the assets invested in exchange traded funds (ETFs) continues to grow.

According to the Investment Company Institute (ICI), the combined assets of U.S.-listed ETFs rose by $14.36 billion, to $610.31 billion, reports ETF Guide.

An increase of 2.4% in comparison to April, and an increase of 25.7% compared to May of last year, is exceptional growth. Also, during the month of May, the value of all ETF shares issued beat that of all the shares redeemed, by $3.21 billion.

Don't Let ETF Closings Give You a Case of the Mondays

Another round of exchange traded funds (ETFs) are closing, and it's got some asking if we're on a death watch.

The short answer is: no. It's just the nature of things that when you have an industry of 700+ products and growing that some are just not going to grab hold of the consumer, for any number of reasons. It could have been a poor concept, or poor timing or just poor marketing, or anything.

Every industry has its products that landed with a thud:

• New Coke, anyone?
• The Edsel.
• The instant classic comedy "Office Space." It was a flop in theaters, barely even recouping what it cost to make it, but became a huge hit on video. Now, did you get the memo?
• "Maxwell's Silver Hammer" by the Beatles. Some people really hate this song, but you'll never hear anyone say the Beatles were done in because of it.

The ETF industry is no exception, and it's hardly a reason to get scared. ETFs still remain increasingly popular, and financial advisors are recommending them for their clients' portfolios, say Leslie Scism and Allison Bisbey Colter for the Wall Street Journal.

For an ETF to turn a profit, the Journal says, it generally needs assets greater than $50 million to $100 million. However, some providers may subsidize their smaller funds for years.

Once an ETF does close, there is a procedure that is followed. Investors aren't left just holding the bag after waking up one morning to see that one of their funds has shuttered.

The latest ETF closings were announced this week, with seven XShares funds closing. Once these funds are liquidated, XShares will have 24 offerings.

The last day of trading for the following funds, which covered various sectors of the real estate market, will be July 24. The liquidation process will be finished on July 31:

• Adelante Shares RE Composite (ACB)
• Adelante Shares RE Classics (ACK)
• Adelante Shares RE Growth (AGV)
• Adelante Shares RE Kings (AKB)
• Adelante Shares RE Shelter (AQS)
• Adelante Shares RE Value (AVU)
• Adelante Shares RE Yield Plus (ATY)

Latin America May Be Slowing Its Economic Rhythm For ETFs

Is life returning to its trademark slow pace in Latin America as economies and exchange traded funds (ETFs) suffer in the wake of the U.S. credit slump?

In Brazil earlier last week, the Bovespa stock index fell 10 points to its lowest level in 10 weeks after industrial output came in lower than economists' forecasts, reports Alexander Ragir and James Attwood for Bloomberg.

On Thursday, the stocks continued their slide as the nation's second-biggest airline forecast larger-than-expected losses, while Citigroup strategists cut estimates for equities on concern about slumping commodities, report Alexander Ragir and James Attwood for Bloomberg.

Record oil prices may be stoking the fire of inflation, leaving many to potentially get burned later this year. The latest inflation rate came in higher last month than it has in two years. High fuel and food prices are adding to the inflationary pressures. Will iShares MSCI Brazil (EWZ) be able to stave off the losses?

Chile is another economy that was reaping the rewards of its natural resources. The U.S. housing slump has hit home there, as rising energy prices are mixing with a cheap dollar and inflation is inevitable, reports Sebastian Loyd for Bloomberg.

iShares MSCI Chile (ECH) is feeling the pinch, down 8.6% year-to-date.

iShares S&P Latin America 40 Index (ILF) has positive numbers for the 3- and 6-month moving averages, and it is just a hair below its 200-day moving average. Year-to-date, it's up 2.9%.

Poland Has Potential As Top Holding in Frontier Market ETF

With the recent launch of the Claymore/BNY Mellon Frontier Markets (FRN), it is now possible to invest in the first U.S.-listed exchange traded fund (ETF) that provides investors access to up to 41 countries considered “frontier markets.” 

These markets are very important to consider given that many of the emerging markets, such as China, are now approaching more of a developed market status. One of these frontier markets worth noting is Poland.  When looking at FRN’s holdings by country, Poland sits atop the list at 23.5%. 

Since 1990, Poland has pursued policy to liberalize its economy and has prevailed among transition economies. Gross domestic product (GDP) grew by roughly 6.5% in 2007 given rising private consumption, a jump in corporate investment, and EU fund inflows. 

EU membership and accessibility to EU funds have generated a major boost to the economy since 2004. Although unemployment is falling rapidly, it was estimated at 12.8% in 2007, where it sat well above the EU average.  Important industries in the Polish economy include machine building, iron and steel, coal mining, chemicals, shipbuilding, food processing, glass, beverages, and textiles. Poland also has several important natural resources including coal, sulfur, copper, natural gas, silver, lead, salt, amber and arable land.

Poland’s economic performance is likely to improve, but in order to do so it must address certain deficiencies in its business environment. An ineffective commercial court system, a rigid labor code, “bureaucratic red tape,” and lower-level corruption keep Poland’s private sector from performing. 

The new PO/PSL coalition government has made public its intention to enact business-friendly reforms, reduce the growth of public sector spending, lower taxes, and accelerate privatization.