ETF Outlook for Wednesday March 19, 2014
Rydex CurrencyShares Canadian Dollar ETF (NYSE:FXC)
A dovish speech by Bank of Canada governor Stephen Poloz send the loonie down 0.8 percent Tuesday as the currency is nearing a five-year low versus the U.S. dollar. He expects a soft first quarter followed by a speedy recovery for a few years, but long-term, an aging population will drive up savings and sap demand.
After hours the countrys finance minister announced his resignation and the loonie did not have much reaction, but considering the big drop during regular trading hours the real movement may come today or as speculation of who will take over the job begins to hit the news wires.
Market Vectors Russia ETF (NYSE:RSX)
The rebound in Russian stocks continues with the ETF up another 4.7 percent yesterday. The three-day total for the ETF has reached 11.7 percent and has the ETF at the best level in nearly two weeks.
The news flow out of Crimea has not slowed, but investors have become numb to geopolitical situations and therefore this type of event is short-lived. It does not suggest there will not be more volatility in the ETF, but for the time being the news does not have investors concerned about Russian leaders expanding their land grab.
iShares MSCI China Small Cap ETF (NYSE:ECNS)
An ETF that is not widely followed has been able to outperform its peers over the last couple weeks and the last year is ECNS. The ETF invests in a basket of over 350 small cap Chinese stocks with a heavy concentration in consumer discretionary, industrials, and IT.
In the last 12 months the ETF is up 15.5 percent, easily beating the large-cap iShares FTSE/Xinhua China 25 Index ETF (NYSE:FXI), which has lost 9 percent. The smaller companies in China are often considered risky, however they do not have to deal with the same risks as the large companies. A competitor to ECNS is the Guggenheim China Small Cap ETF (NYSE:HAO). HAO has $233 million in assets versus only $32 million for ECNS.
Cambria Global Value ETF (NYSE:GVAL)
The new ETF, launched last week, has begun to attract some volume as the ETF traded 31,000 shares Tuesday. The number is nowhere near staggering, but considering that most ETFs struggle to get volume in the early stages it is quite impressive. The ETF looks at 45 global markets and determines the 11 most undervalued and then will invest in them.
The portfolio is currently focused on the emerging markets, which based on valuations are attractive. This could be a value trap as cheap regions can always get cheaper, but over time this strategy could work for patient investors.
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