Will Vietnam's Inflation Pressures Be Under Control In Time for ETF?

June 02, 2008
by Tom Lydon

Vietnam_1280_992p7ih9j Vietnam is in the middle of an inflation crisis one hopes will improve by the time an exchange traded fund (ETF) for the country is launched.

While Market Vectors awaits the okay from the Securities and Exchange Commission (SEC) for its Vietnam ETF, the country's leaders are struggling to keep prices under control.

About 1,000 workers walked off the job at Panasonic Communications Vietnam Co., demanding higher pay to keep pace with inflation that rose 25.2% year-over-year in May, reports James Hookway for the Wall Street Journal. It's just the latest of similar protests as workers see the buying power of their wages sharply decreased.

According to government statistics, about 300 strikes took place in the first quarter. That's up from 103 in the first quarter of last year, and it's also in spite of a new labor rule that states workers can be held liable to compensate their employers if they walk off the job illegally.

Despite the problems, foreign companies are expanding their operations in the country. Last year, foreign companies applied to invest $20 billion in Vietnam - one-third more than in Thailand. This has contributed to sharply rising office rents.

Just as in the United States, inflation is weighing on the financial markets and stock prices are sliding. They've already fallen 55% since the first of the year, and economists are worried that the problem could lead to a broad economic crisis if it isn't handled correctly.

Digging Deeper Into Metals And Mining ETFs

May 20, 2008
by Tom Lydon

Miner2 As commodities become all the rage with investors, commodities exchange traded funds (ETFs) have proliferated alongside them.

ETF Expert's Gary Gordon for Equities Magazine has five mining-focused funds that might fit an investor's risk profile:

  • Market Vectors Gold Miners Fund (GDX):  As investors turned to gold as a safe haven earlier this year amid Federal Reserve rate cuts, this ETF received some attention. On average, more than 4,000,000 shares of GDX trade in a day. The index targets 30 companies around the world that mine gold and silver. The ETF is 77% concentrated in Canada and South Africa. A sharp drop in the price of gold could hit this fund hard, though. Year-to-date, it's up 3.4%.
  • SPDR S&P Metals and Mining (XME): This ETF benefits from the global infrastructure demand and tracks 25 companies in the material/energy acquisition business. It is diversified across steel producers, coal miners, and zinc and palladium extractors. Year-to-date, it's up 27.4%.
  • Market Vectors Coal (KOL): Foreign exposure is key with untapped, emerging markets such as Thailand and Indonesia as the base. This ETF is made up of both coal producers and coal consumers. It's one of the easier ways to directly capitalize on growing demand for the commodity. It's up 26% since its Jan. 15 inception.
  • iShares MSCI Chile Fund (ECH): Copper is the commodity of choice in this fund, as Chile is responsible for one-third of the world's copper production. Year-to-date, it's up 4.7%. Copper is used in every major industry, and growth among emerging markets will only further fuel demand for it.
  • iShares MSCI South Africa Index (EZA): Natural resources go with South Africa like salt goes with pepper, and the ETF follows correlated segments of the country's economy, including materials, energy, metals, and commodities. This ETF might appeal to aggressive investors. Year-to-date, it's up 5.2%.

iShares Breaks New Ground With Israel, Turkey and Thailand ETFs

March 28, 2008
by Tom Lydon

143745470Barclays Global Investors is breaking new ground with their iShares exchange traded funds (ETFs): they're the first to launch funds covering Israel, Thailand and Turkey.

In addition to these funds, iShares has also launched two global funds. One covers the world, another covers the world, minus the United States. The addition of these five funds means iShares has the largest international ETF offering, with more than 60 global, international and emerging market funds.

According to Noel Archard, head of U.S. iShares product development, non-U.S. markets account for 57% of the world's equity market capitalization and performance of these markets continues to differ from the U.S. markets.

The new ETFs are:

  • iShares MSCI ACWI Index Fund (ACWI)
  • iShares MSCI ACWI ex US Fund (ACWX)
  • iShares MSCI Isreal Capped Investable Market Index Fund (EIS)
  • iShares MSCI Turkey Investable Market Fund (TUR)
  • iShares MSCI Thailand Investable Market Index Fund (THD)

The biggest asset attractor, reports Murray Coleman for Index Universe, will likely be ACWI. It has 2,884 stocks from both developed and emerging markets in every investible market in the world.

Turkey: The country is poised on the brink of seeing its newfound political and economic stability crumble, reports Yigal Schleifer for Eurasia Net. The Constitutional Court is expected to consider a motion to shut down the governing party. The country's currency, the lira, hit a seven-month low. Turkish law gives the judiciary broad powers to shut down political parties, and it has closed 24 of them since its establishment in 1963. The lawsuit is threatening the country's bid for European Union membership.

Israel: Despite the ongoing troubles in the Middle East, Israel's economy has moved at a 5% growth rate for the last four years, reports Paul David Glader for World Magazine. The currency, the shekel, has gained 31% against the dollar in the last two years, and unemployment is at its lowest level in the past decade. The country has also lowered its debt.

Thailand: Share prices closed higher today, but any optimism investors have there is overshadowed by U.S. economy fears, reports Thomson Financial. Thailand benefits from its country's general pro-investment policies and has strong export growth - 17% in 2006 and 12% in 2007. Last year, the economy grew 4.5%, according to the CIA World Factbook.

Thailand's Unrest Could Keep an ETF Out of the Picture For Now

March 02, 2008
by Tom Lydon

207412905 Thailand does not have a U.S.-listed exchange traded fund (ETF) like several other frontier countries - yet.

The exiled former Prime Minister Thaksin Shinawatra returned to Thailand Thursday for the first time since a September 2006 coup. Daniel Den Kate for The Christian Science Monitor reports that the former Prime Minister returned to Thailand in an attempt, he says, to regain his own being and his reputation.

The former leader has returned to the same country where the gap between the rural poor and the middle class is miles wide. The poor see him as a champion, while the richer segment of the population wanted him out.

The parliament will sustain stability but the threat of confrontation among anti-Thaksin and pro-Thaksin will linger for some time.

The political unrest could leave any chance for a U.S.-listed ETF on the back-burner for the time being.

New Asian Index Launched; ETFs Won't Be Far Behind

October 12, 2007
by Tom Lydon

Asia_etfs New Asian-related exchange traded funds (ETFs) could be coming soon. Standard & Poor's (S&P) has announced the launch of a new index covering Southeast Asia. Emerging markets in Asia have been on fire lately, so this new index aims to capitalize on that trend. The S&P Southeast Asia 40 Index covers the Philippines, Indonesia, Malaysia and Thailand; Asian countries the S&P refers to as "tigers," says Heather Bell for Index Universe.

However, this isn't the first index to cover Southeast Asia. Currently available is the FTSE/ASEAN 40 Index that launched in 2005, which covers Indonesia, Malaysia, the Philippines, Thailand and Singapore.

The most obvious difference between the two indexes is that the FTSE/ASEAN 40 Index includes Singapore. Twelve stocks and more than 46% of the index's market capitalization is invested in Singapore. In addition to excluding Singapore, the new S&P index uses a modified market capitalization weighting approach that limits individual stocks to 10% of the index and individual countries to 40% of the index. Basically, if investors are looking to capture the performance of the ASEAN region, the FTSE index might be more appropriate. However, if investors are strictly looking for exposure to Southeast Asian emerging markets, the S&P index might be more practical.

A Toast to Thailand's First ETF

September 07, 2007
by Tom Lydon

Etf_toast Thailand's first exchange traded fund (ETF) had a successful launch yesterday. The ThaiDex SET50 ETF (TDEX) closed with unit prices 3.6% higher than the initial public offering (IPO) price, according to Krissana Parnsoonthorn for the Bangkok Post. However, the launch did not go off without a hitch: A "halt" sign was misplaced on the ETF's units for several minutes in the morning. It turns out the sign was added because market officials forgot to record the total units of TDEX.

Thailand is an emerging-market country ready to embrace economic expansion, which makes the launch of its first ETF that much more exciting. Given the country's strong economic fundamentals, its economy is expected to expand more next year. Hopefully Thailand will partner with some U.S. ETF providers to launch a Thailand-based ETF in which we can invest.

Which Emerging-market ETF Is Right for You?

September 02, 2007
by Tom Lydon

Emergingmarket_etfs_2 Emerging-market exchange traded funds (ETFs) have been popular lately because of their generally strong performance over the past few years. The great thing about emerging-market ETFs is that there is wide selection; almost every ETF provider offers one, as Gary Gordon for ETF Expert notes. Yet, with many choices comes responsibility; investors need to look at the options and see what, if any, meet their financial goals. One way to tell them apart is through their country holdings. Here's a comparison:

  • Vanguard Emerging Markets Stock ETF (VWO)
    South Korea dominates this ETF at 15.1%. Taiwan is next at 12.4%, followed by Hong Kong at 10.9%, Brazil at 9.4% and South Africa at 7.6%. VWO is currently up 18.4% year-to-date.
  • SPDR S&P Emerging markets (GMM)
    GMM is equally heavy in Brazil and Hong Kong at 12.0%. Next comes South Africa at 8.9%, Taiwan at 6.6% and India at 6.3%. Having launched in March, GMM is currently up 6.3% over the last three months.
  • iShares MSCI Emerging Markets (EEM)
    South Korea also is the largest holding in EEM at 15.8%. However, it differs from VWO in its lower holdings. Hong Kong gets 12.2%, Brazil has 11.6%, Taiwan gets 9.6% and South Africa at 8.4%. EEM is up 14.2% year-to-date.
  • WisdomTree Emerging Markets High-Yielding Equity Fund (DEM)
    This ETF invests a whopping 27.8% in Taiwan, followed by 11.3% in Brazil, 9.3% in Korea, 8.7% in South Africa and 8.2% in Thailand. DEM just launched in July, which was bad timing, so it's down 5.0% over the last month.

For full disclosure, some of Tom Lydon's clients own EEM.

Emerging Markets ETFs Can Breath Again

January 21, 2007
by Tom Lydon

1685003244_1 Investors who own any exchange traded funds (ETFs) in emerging markets can begin to stop holding their breaths. The major correction enhanced by a five year rally for the sector may not even occur. The main point is that markets were able to rebound from the take over in Thailand so there is proving to be a new resilience in emerging markets. Barbara Kollmeyer of reports that valuations, financial resources and balances in the past five years are enough to keep this sector afloat.

The major countries in emerging markets-Brazil, Russia and China, are equipped with healthy account surpluses. As long as Brazil, Russia, China and India, stay healthy, growing and forward progressing, the sector should be alright.

Emerging markets are off to a slow beginning for 2007, according to MSCI data, BRIC markets are down 2.8%. iShares MSCI Emerging Markets (EEM) picked up 1.8% on Friday.  Industry insiders say the biggest threat is the level of liquidity splashing around.

For full disclosure: Some of Tom Lydon's clients own EEM.

Emerging Markets ETFs Disaster Begins in Thailand

December 22, 2006
by Tom Lydon

1240871157 The following occurrence is an example of why emerging markets exchange traded funds (ETFs) need intense monitoring. Thailand's new government, which gained power only months ago, drove its country's financial markets into utter chaos by imposing heavy penalties on foreign investors. According to Brett Arends with, the Bangkok stock exchange fell 15%, after previously falling 20% due to the spread on other emerging markets. This financial disaster caused investors to pull out $699 million from the Thai stock market in a day!

Thailand's new laws were designed to cool the stock market which will cause a lot of fund managers to pull out and it won't stop there. Hedge funds will be forced to sell and the effect will trickle down to all emerging markets. It's not a matter of "if", it's "when".