5 Copper ETFs Poised For Growth In 2011

In 2010, copper locked in a second consecutive annual gain of nearly 33 percent as demand remained elevated due to growth in emerging markets and a weak dollar.  As for the future of the industrial metal, copper’s outlook remains rosy as a supply and demand imbalance is expected to take place providing positive price support to the Global X Copper Miners ETF (COPX), the iPath Dow Jones Copper Index ETN (JJC), the First Trust ISE Global Copper Index Fund (CU), the PowerShares DB Base Metals (DBB) and the iShares MSCI Chile Index (ECH).

According to the International Copper Study Group, a copper deficit of 435,000 metric tons in 2011 is expected to emerge in the markets, marking the first deficit in three years, during which global production has averaged 18 million tons.  On the demand side, one of the primary driver’s of increased demand is economic expansion in emerging markets.  The developing world is expected to at the forefront of global economic growth and with this the need for improved infrastructure and increased construction and manufacturing is expected to keep demand for copper, which is used in electrical wiring, plumbing and in heating and cooling systems, elevated.   

Two Latin American ETFs For 2011

As the developed world continues to struggle out of the Great Recession, emerging markets performed relatively well in 2010 and are expected to sustain this growth and performance in the coming year.  China continues to draw headlines and steal most of the attention; however, in the coming year, Latin America may be the place to look and for good reason.

Inflationary threats and real estate bubbles have taken front and center stage in China, resulting in the nation increasing its benchmark interest rates for the second time in three months and increasing banking reserve ratios to reduce risk, which could hinder future economic growth.  A different song is being sung in Latin America as inflation is expected to remain subdued, which is expected to lower pressure on central banks to change interest rates which will likely further limit the possibilities of tighter monetary policies.

Four ETFs Supported By Copper’s Supply Woes

The price of copper has witnessed positive support over the last few months and imbalances in supply and demand of the base metal are expected to provide further support to prices in the near future, enabling the iPath Dow Jones Copper Index ETN (JJC), the PowerShares DB Base Metals (DBB), the iShares MSCI Chile Index (ECH) and the iShares MSCI Australia Index (EWA) to reap the benefits.

Three ETFs To Play Copper’s Expected Rise

Despite weaknesses in US demand for copper, the metal has been trading at its highest level in the past four months paving the path to opportunity for the iPath Dow Jones Copper Index (JJC), the PowerShares DB Base Metals (DBB) and the iShares MSCI Chile Index (ECH).

The US, which is the world’s second largest consumer of copper, is expected to witness weaknesses in demand for copper as the nation’s housing sector continues to take a beating.  In July of this year, sales of existing homes dropped by 27.2% followed by a drop of 12.4% in sales of new homes.  These trends are significant because building and construction account for nearly 50% of copper usage in the US. 

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.

Frontier Market ETFs: A Hidden Treasure

By Kevin Grewal

As talks about asset bubbles, oversaturation and over pricing loom over emerging markets, like Brazil, India and China, frontier markets might just be a diamond in the rough. 

According to the International Monetary Fund, 17 out of the 20 fastest expanding economies are considered to be categorized under frontier markets.   Frontier markets can be defined as developing markets which are at a much earlier stage of economic and financial market development than emerging markets.  Some examples include Qatar, Uzbekistan, Pakistan, Vietnam, Argentina, Chile, Ghana and Angola.

One reason these markets are attractive is because they were protected from the global credit crisis because they didn’t have access to Western finances.  Another reason the segment has appeal is strong macroeconomic growth and rapid economic development which generally translates into higher earnings potential for domestic companies and investors. 

Why Investing Abroad Makes Sense

As the U.S. economy continues to struggle, consumer spending remains weak, consumer confidence remains fragile and the labor markets try to get a boost, investing abroad makes sense and for good reason.