Wednesday, July 17, 2013

Bernanke is likely to tell Congress today that he can’t maintain the Fed’s massive stimulus forever but plans to keep rates low for a long time, the Fed Funds rate anyway.  It remains to be seen if he will be able to keep long rates low without standing in the pits as the only buyer.  Quant is preparing for another taper tantrum as only 5 of today’s top 10 are US funds.  The other 5 are GDX and GRID in 2nd and 5th place (see July 8th and 9th posts) and 3 Asian funds closing out the top 10.  The SPDR S&P China Fund (GXC) moved down 6 places to 8th as the iShares FTSE/Xinhua China 25 Index Fund (FXI) gained 5 places to 9th.  Tied at 9th place is the iShares MSCI All Country Asia ex Japan Index Fund (AAXJ).

The 3 Asian funds have spent 2013 giving up most of their gains from last fall but have held their lows from the summer and look ready to do it all again.  Technical scores are good but not great in the low 60s but 58.4 for FXI, and sentiment scores are better for all 3.  Fundamentals are most responsible for their high ranks with GXC scoring 80.5, AAXJ at 75.1 and FXI at 72.1.  China has already had its bear market, although GXC held its losses to less than 20%, and AAXJ was down almost 15% YTD in late June.  All 3 have bounced off their recent lows and put in higher lows which have boosted their technical scores by about 10 points over the last couple of weeks.  Fundamental Scores have also risen with some better reports.

On the Diamond models, GXC has the highest Green Diamond Reward Rating at 9.27 followed by FXI at 8.85 and AAXJ at 8.78.  Poor performance this year has hurt all three on the risk side with GXC carrying the most risk with a 6.33 Red Diamond Risk Rating followed by FXI at 6.18 and AAXJ more moderate but still above average at 5.28.   If you want Asia but lower risk, take a look at Malaysia’s EWM in 12th place with a low 2.21 Risk Rating.  Several other foreign funds have remerged into the upper ranks and we can only hope they perform as well as they did last fall.  Please send any questions to and thanks for reading. 

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