5 ETFs To Play Australia

Over the last century, Australia has outperformed its counterparties in the developed world, while offering one of the lowest volatilities to investors. As for the future, the Land Down Under is expected to continue its growth, providing returns and the path to opportunity for some. 

A major reason that the future remains prosperous for Australia is due to its close ties with Asia.  According to the International Monetary Fund (IMF), exports to China and India have been growing at a rate of 18%-19% per year and are expected to continue to grow.  As China and India continue to emerge as global economic powerhouses, Australia will likely continue to reap the benefits.  In fact, Asia as a region is expected to witness economic growth of nearly 50 percent over the next five years and account for more than a third of total global output. 

ETF Based On Islam To Shut Doors

On October 19, 2010, Javelin Exchange Traded Shares will officially close the door on the Dow Jones Islamic Market International Index Fund (JVS). 

JVS first began trading in July 2009 and came to market to offer investors a way to gain access to companies that abided by Islamic law.  The strategy excluded businesses that were involved in the alcohol and tobacco industries, gambling, pornography, unconventional financial services and those that produced pork-related food products.  Some of JVS’ holdings include metals and mining giant BHP Billiton (BHP), pharmaceutical giants Novartis (NVS) and GlaxoSmithKline (GSK) as well as energy giant BP (BP). 

A New ETF To Play Global Demand Of Natural Resources

As the demand for natural resources has jumped and is expected to continue to do so due to increased wealth in developing nations and a growing global population, State Street recently launched the SPDR S&P Global Natural Resources ETF (GNR) to enable investors to gain access to the sector.

The new ETF will track the S&P Global Natural Resources Index, which is an index comprised of 90 of the largest publicly traded companies, based on market capitalization, in global natural resources and commodities businesses that meet certain investibility requirements .    Companies that are included in global natural resources include those which are engaged in agriculture, integrated oil and gas, oil and gas drilling, oil and gas exploration and exploration, oil and gas refining, coal and consumable fuels, diversified metals and mining, steel, aluminum, gold and other precious metals. 

3 Reasons Australian ETFs Could Shine

Historically speaking, over the last century, Australia’s stock market has outperformed all others and has offered the one of the lowest volatilities amongst all of its peers.  As for the future, there are three forces that could enable the nation down under to continue to shine. 

According to a study conducted by Credit Suisse, during the period of 1900 to 2009, Australia’s markets posted 7.5% after inflation returns per year while witnessing a standard deviation of 18.2%, the highest returns and the second lowest volatility of the 19 major, mostly-developed markets studied.  In comparison, during the same time period, the U.S. stock market made a 6.2% return with a standard deviation of 20.4%.  What this demonstrates is that investors would have made more money and taken less risk by investing in Australian markets. 

One force that could enable Australia to remain prosperous is its close ties to Asia, states Howard Gold of Market Watch.  Half of Australia’s exports go to Asia, with China being its largest trading partner.  With economic growth prospects in Asia, in particularly China, remaining relatively healthy for the next 10 years, Australia is set to reap the benefits.

Steel May Face Headwinds In The Future

Despite holding firm for numerous months, uncertainty in global economic growth, resulting in spotty demand, is causing the price of steel to decline and will likely continue to provide negative price support for the commodity.

The decline in steel prices is most evident in the fall of the Baltic Dry Index (BDI).  The BDI is a measure of commodity shipping costs, of which iron-ore, which is used to create steel, creates the single biggest source of demand for dry-bulk shipping.  The BDI has declined for the longest consecutive period in nearly nine years and this decline is primarily being driven by declining Chinese steel prices and demand. 

China Driving Fate Of ETFs

By Kevin Grewal

When it comes to the global economy, China continues to be the talk of the town.  To take it a step further, the nation, expected to witness the largest economic growth in 2010, is said to be driving the fate of exchange traded funds (ETFs).

According to a recent Securities and Commission filing by the Chinese Investment Corporation (CIC), the sovereign wealth fund holds north of $9 billion in U.S. equity investments.  The detailed filing further indicates the following allocations:

• $254 million to the iShares S&P Global Materials (MXI)
• $235 million to the Select Sector SPDR TR SBI Int Energy (XLE)
• $207 million to the iShares MSCI EAFE Index (EFA), which holds BHP Billiton (BHP) as one of its top holdings.
• $156 million to the SPDR Gold Trust (GLD)
• $116 million to the Market Vectors Gold Miners ETF (GDX)
• $107 million to the iShares S&P Global Energy (IXC)
• $83 million to the Materials Select Sector SPDR (XLB)
• $79 million to the U.S. Oil Fund (USO)

In addition to these allocations, the CIC has allocated $6.2 million to Anadarko Petroleum (APC), and $5.2 million to Chesapeake Energy (CHK), which are holdings in XLE and IXC and indirectly influence their performance.

ETFs To Benefit From Chile’s Earthquake

By Kevin Grewal

In the midst of a natural disaster and catastrophe in Chile, the metals and mining industry is likely to see positive price supports in the near future. 

One major factor that drives the price of metals is the efficiency and speed of extraction of the metal in the production and mining process.  According to analysts, this process is likely to be hindered.  The good news is that most of Chile’s copper deposits and port facilities are in the northern half of the nation and had no major reports of damage.  However, despite locality, numerous copper mines, responsible for more that 15% of Chile’s copper output halted operations as a result of the quake. 

Although most copper mines are expected to resume operations, many suggest that production and output could be hindered due to damage to Chile’s infrastructure, disruption in electricity and power generation and an increase in difficulty in transportation to and from the mines. 

Metals and mining giants, BHP Billition (BHP) and Rio Tinto (RTP), both who hold significant stakes in the world’s largest copper mine have openly stated that operations in Chilean mines will resume and damage to mines is obsolete, but are still concerned with production efficiency.

Metals Remain Attractive For Good Reason

By Kevin Grewal

As developing nations continue to prosper, grow and decouple from the Western world, the demand for certain alloying metals is likely to surge making them a highly sought after commodity.

There is a direct correlation with the demand for alloying metals and economic growth.  In general, as economies grow, they consume and hence demand more alloying metals.  Some of these metals, like aluminum, iron and copper are invaluable building a modern economy due to their roles in the development of roadways, communications and other areas of infrastructure.

Additionally, these metals are vital to the development and expansion of a nation’s manufacturing sector.  This was seen in 2009 as China’s economy and manufacturing sector grew forcing increased consumption and demand of copper, which further resulted in higher copper prices. 

As for the coming year, developing nations are expected to be at the forefront of economic growth and will likely be the drivers of increased demand for these metals.  Copper has positive fundamentals and is likely to see a market imbalance on the supply and demand side resulting in a deficit in the metal, pushing prices up. 

How To Play The Diamond Market

By Kevin Grewal

As the global economy recovers and the middle class widens in developing nations, the outlook for the diamond sector is likely to be promising.

The rough diamond market has already starting to rebound and prices are close to levels seen before the global financial meltdown which forced demand for diamonds and jewelry to dwindle dramatically down.  In fact, some analysts and diamond experts suggest that valuations of diamond stocks appear to be relatively cheap.

Another factor that is likely to benefit the diamond markets includes an increased willingness of investors to provide financing to diamond mining and exploration companies.   Additionally, an expected rebound in consumer spending will likely result in increased demand for jewelry and bolster revenues for diamond producers.    Most notably, demand is likely to increase in nations like China, India and Brazil as incomes start to increase and consumers demand the finer things in life.

4 Commodity ETFs Destined To Prosper

By Kevin Grewal

As economies around the world continue to grow and develop, commodities are likely to remain attractive and for good reason.

Emerging markets are anticipated to grow at exponential rates in the coming year.  China is expected to grow at a rate greater than 8%, India is expected to grow close to 7% and other nations in Africa and Latin America are expected to show some signs of prosperity as well.  To add to this growth, developed nations like the United States are expected to grow which will further bolster upward pressure on commodity prices.

In fact, supply and demand forces have already been taken putting pressure on commodity prices evident through the recent uptick seen in the Batic Dry Index (BDI).  The BDI is an efficient indicator of future economic growth and production and measures the price of shipping dry bulk.   As international demand of commodities increases, the price to ship dry bulk generally increases as well.