High Reward and Risk in Indonesia

Emerging markets are getting a bounce in price and scores after a rout that has inflicted damage mostly on countries with large current account deficits.  With more than a third of AUM in the financial sector, the iShares MSCI Indonesia Investable Market Index Fund (EIDO) is a big Quant mover today jumping 89 positions into 6^th place.  It has an excellent 9.14 Green Diamond Reward Rating driven by a 98.1 Fundamental Score suggesting it is about as cheap as it has been since launching in May of 2010.  Being down more than 25% year to date explains its weak Behavioral Score and its Red Diamond Risk Rating rising up to an above average 5.52.

This had been a low risk fund when it ranked and performed so well last summer and fall.  It dropped out of the top 100 in late 2012 which may have been early but was higher than now.  It had a Risk Rating below 3 then but that has risen throughout 2013 as the fund has fallen in price.  Our Risk Ratings are not predictive but reflect attributes of a product’s trading and composition falling under several risk categories that you can see on the Red Diamond Risk Ratings page.  View all products and sort by any category or put a symbol or name in the search box to see it alone.  EIDO shows a high 7.40 Deviation score and an also high 6.84 Volatility score which are typical of leveraged and inverse products and reflect its recent rout.  That price drop has brought the Fundamental Score up so high but the factor most likely to drive performance does not get scored in our models and that is the value of the Indonesian rupiah.

Before investing in the emerging markets you need to fully assess the implications and ETF Global^® Risk and Reward Ratings are valuable tools in that process.  Fed taper talk is becoming increasingly important to the emerging markets and is likely to affect performance but if you are looking for high risk and reward, EIDO may fit your criteria.  Do your due diligence, fully assess the risk, PDF the Tearsheet and maybe take a trip there to make sure, it shouldn't cost too much after the currency slide.  ETF Global^® is proud to serve the financial community laboring to serve their clients in a low rate environment, enjoy the long Labor Day weekend! 

Quant Gets More Selective Internationally

Quant continues to wave the flag with 8 US ETFs in the top 10. The two China funds, 3^rd place GXC and 8^th place FXI, are lagging this week but still outperforming nicely since breaking back into the top ranks last month.  They lead the thinning ranks of foreign funds in today’s top 100, with 27 others making the list and an additional 11 Global funds.

They are weighted towards Asia with another China fund, PGJ, in 84^th place and Japan’s FJP in 72^nd.   iShares’ AAIT ranks 81^st with about a third of AUM in Japan.  If you want Asia without Japan, WisdomTree’s Asia Pacific ex-Japan Fund (AXJL) holds 19^th place and emerging Asia fund GMF ranks 23^rd.  Country specific Asian funds include South Korea’s EWY in 12^th place with low risk at 2.6 Red Diamonds, Indonesia’s IDX and EIDO in 74^th and 95^th, and Taiwan and Phillipines tied at 89^th place with EWT and EPHE. Broader emerging markets funds are led by ADRE in 14^th place; GMM, EEM and EELV in the top 50; and Vanguard’s VWO at 68^th.   Sticking with the EMs, we see Egypt’s EGPT holding its recent outperformance and 51^st place today.  Peru gets 80^th place with EPU and Russia’s RSXJ and ERUS rank 89^th and 93^rd.

Moving up the development scale to Europe, we see 4 specific country funds carrying lower than average Risk Ratings.  Austria’s EWO ranks 59^th, ENOR and EWD from Norway and Sweden rank 74^th and 84^th, and the Netherlands has EWN in 77^th place with a low 2.83 Risk Rating.  Pan European FEZ has been ranking better and outperforming since mid July and holds 33^rd place while FEU has outperformed to a lesser extent and is tied at 100^th place today.  iShares EFA has a heavy European weighting at 51^st place.  Canada’s EWC has been in the top 100 more often than not and holds 30^th place today.  It has low risk at 2.55 Red diamonds but also low return.

The global funds include SIL in 9^th place and recently highlighted SKYY in 10^th with other materials, energy and theme funds among the group.  As currency markets and geopolitics dominate the news, we have seen US funds reemerge into the upper ranks but Quant’s emerging markets stance remains at a lesser and more specific extent.  So check the Quant scores and ETFG^sm Tearsheets carefully and please send any questions to support@etfg.com .

US Sector Funds Scoring Better

The 2 China funds, SPDR’s GXC and iShares’ FXI, continue to score and perform well, holding 2^nd and 6^th place today but the other 8 of the top 10 are all US funds, a number we have not seen as high since early July.  Various sectors are represented and we thought it is a good time to take one of our regular looks at the sectors appearing in today’s top 100 ranked funds which on average have outperformed the S&P 500.

With WTI back above $110 per barrel, energy is dancing the war drum beat as Quant’s favorite sector with 9 funds in the top 100 with an average score of 69.7.  Yesterday’s highlighted XOP and XLE remain in the top 10 at 1^st and 8^th place but IEO has slipped to 21^st.  Technology has 8 funds on the list averaging 66.7 on their Quant scores and Vanguard’s Information Technology Fund (VGT) makes the top 10 in 9^th place. The materials sector sees 6 funds appearing in today’s top 100 and their average score of 69.1 beats the 8 technology funds as does their average 7.96 Reward Rating.  Only XME makes the top 10 in 4^th place with the silver miners in SIL close at 11^th.

Those are the favorite sectors as there are only 2 health care and industrial funds on the list and all 4 are Powershares smart beta funds.  Their pharmaceutical fund, PJP, gets 89^th place with a score of 65 but their S&P SmallCap Industrials Portfolio (PSCI) that we highlighted August 22^nd remains in 5^th place with a score of 73.3, an 8.48 Green Diamond Reward Rating and only 2.9 Red Diamonds.  Powershares also has the sole financial fund in the top 100 with smart beta PFI in 80^th place.  Consumer staples does a little better with the iShares Dow Jones U.S. Consumer Goods Index Fund (IYK) in 65^th place.  There are no funds from the consumer discretionary, telecommunications or utilities sectors making today’s top 100.

As President Obama prepares his scalpel for a surgical strike on Syria, Quant is waving the flag and turning its focus to some oversold US funds.  Currency volatility is also shaking money out of certain emerging markets that is landing back home in the US.  We will save a tour of the international offerings in Quant’s top 100 for another day.  Thank you for checking in to ETF Global^® today.

War Drums Reverberate in Energy ETFs

Buy when the bombs fly but in the meantime focus on energy.  5 of today’s top 10 are US funds with 3 of them energy sector based.   Regular readers know the 2^nd place SPDR S&P Oil & Gas Exploration & Production Fund (XOP) as a member of the top 10 for most of 2013.  It has had a rocky ride but mostly kept pace with the S&P 500’s huge rally.  iShares’ competing Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO) in 5^th place, has spent most of this year in the top 50 and performed about as well depending on the time frame. If you like them big and broad, SPDR’s big daddy Energy Select Sector Fund (XLE) with over $8 billion in AUM places 9^th today and has only begun to outperform since last week’s “moral obscenity” in Syria.

Comparing the group in the ETFG^sm Scanner (sort by Quant and check each fund’s compare box and then the orange Compare button) we see them trading at discounts to the market with higher Risk Ratings.  The discounts suggest we may be currently on the favorable side of that higher risk.  You can choose which metrics to display under the Filter button and see the group’s Quant Report with that button.  The notable Quant differences appear among the E&P funds where IEO has better sentiment readings thanks to higher put/call and short interest scores.  Differences in constituents account for the disparate Fundamental Scores where XOP’s 79.9 beats IEO’s 67.4.  The ETFG^sm Tearsheets show XOP is equally weighted with Forest Oil at 1.81% in its top position while IEO has Occidental Pete accounting for 13.2% of AUM.  If you sort each fund’s constituents alphabetically they look more similar.  XLE is market cap weighted with Exxon Mobil holding more than 16% of assets.

We do not yet know what the consequences will be for Syria crossing the red line but months of Hans Blix playing cat and mouse with tyrants may make energy the only place to hide.  ETF Global^® does not do geopolitics but they have a way of affecting the market based indicators so integral to our quantitative models.  Those strengthening Behavioral metrics have met strong Fundamentals to place these 3 among today’s top 10.  We will listen to the beat of the war drums and convey the models’ message each day, thanks for checking in today. 

China and Emerging Markets Recover

We have been following the recent volatility in emerging markets attempting to discern if the two month rally is ending and the answer seems to lie within the confines of the Federal Reserve.  Last week’s taper fears have subsided with weak home sales and disagreement among central bank governors.  So as the Carpenters sang, it looks like we’ve only just begun. 

It has been all white lace and promises for the SPDR S&P China Fund (GXC) getting all 10 Green Diamonds for the 18^th time since July 12^th and 15 of the last 17 days.  It has gained about 8% in those 6 weeks that the US market has lost about 1%.  Performance like that certainly earns its 1^st place rank and the iShares FTSE/Xinhua China 25 Index Fund (FXI) has earned its 3^rd place rank by performing as well despite scares last week.  Scores are similar to when we highlighted both funds last Wednesday with the exception of better Behavioral Scores today resulting from higher volatility readings.  That volatility knocked a couple of broader emerging markets funds out of the top 10 but the Powershares BLDRS Emerging Markets 50 ADR Index Fund (ADRE) has come back to 4^th place today and their S&P Emerging Markets Low Volatility Portfolio (EELV) has come back to 6^th.  EELV was also covered Wednesday with almost the same scores except for its higher Behavioral Score today on the same uptick in volatility.  We mentioned ADRE a few times in July and early August but haven’t highlighted its more balanced scores with 67.9 on the Behavioral side along with its better 78.4 Fundamental Score.  Short interest, implied volatility and short and intermediate term technicals all drive the Behavioral side while the Fundamentals are driven by 98 in both cash flow and book value scores.  3 of the 4 ETFs have Red Diamond Risk Ratings above 5 with EELV coming in below average at 3.49, as its name would suggest.

With so many roads to choose from, Quant helps us share horizons that are new to us and we will watch the signs along the way here at ETFG^sm Daily Perspectives.   Those signs say the emerging markets still have room to grow and yes, we’ve just begun.  Even before the Carpenters began to sing, a pioneering woman was elected to membership in the NYSE, more than 45 years later we wish Muriel Seibert peaceful eternal rest.

ETFs Provide Price Discovery

We do not know if Eddie Snowden bought his way out of China with Nasdaq’s computer code but from what we have heard about the NSA, he probably had access to it.  We do know that during yesterday’s 3 hour trading halt, NYSE listed ETFs were providing price discovery on where the underlying equities would likely be trading when the connectivity issue was finally resolved.  Trading in the Vanguard Information Technology Fund (VGT) was choppy throughout the hiatus but did capture the upward bias that was developing into the close.  It is a constituent in the ETFG Quant Equity 12 Index which gained 1.6% on the day, almost double the S&P’s gain.  Its best performers were the emerging markets constituents which are scoring better today and the 2 China funds, GXC in 2^nd place with 10 Green Diamonds and FXI in 3^rd.

Published under the ticker ETFGQE12, the smart beta index represents monthly selections from our Quant model with liquidity constraints.  You can follow it under the Dynamic tab on our home page index screen and clicking on it will bring up its 12 constituent ETFs.  At the bottom of that screen we provide further information including a detailed fact sheet showing its performance exceeding the popular benchmark proxies SPY and ACWI over its first year.  The ETFG Quant Equity 10 Index (ETFGQE10) is similarly comprised but without the liquidity constraints and it performed even better.  We also publish the market performance ETFG Global 500 Index (ETFG500) representing the 500 largest ETFs, excluding leveraged and inverse.  It is the first benchmark to cross asset classes and regions providing performance discovery for managers who take full advantage of the exposures that ETFs provide.

Beyond those 3 published indices, we have several more that slice the markets by Asset Class, Geography, and Sectors.  Others not appearing include a market neutral index that gained more than 10% in its first year and custom ones designed to client specifications. You can get tracking data on the 500 free of charge and others on a contractual basis, please contact us to learn more.  By providing liquidity during the outage, ETFs further cemented their importance to the marketplace and ETF Global^® is proud to be part of the burgeoning industry. Residing in old midtown office space we can sympathize with connectivity issues when it rains so our market participants can always call us at 212-223-ETFG. 

SmallCaps Insulated from Currency Turmoil

Since the late June low, we have mentioned a top ranking fund several times but have yet to highlight it.  It handled that decline very well and also outperformed on the July rebound, ranking in the top 10 for most of the month.  It fell out of the top 25 in early August but is back at 5^th place today having held a bottom from 2 days ago.   With a high 8.84 Green Diamond Reward Rating, the Powershares S&P SmallCap Industrials Portfolio (PSCI) gets there with a low 2.74 Red Diamond Risk Rating.  That wide risk reward spread is only one of the pretty attributes on its ETFG^sm Tearsheet.

Right below those diamonds are PSCI’s Quant scores showing 70s or better across the board. Technicals edge out sentiment on the Behavioral side and cash flow and yield drive the Fundamental Score with earnings and book value lagging.  Its chart does not excite until you look at more than the past month.  It has outperformed in downturns and even more on the rallies.  Tracking the industrial subset of the S&P SmallCap 600 Index, the fund is up more than 21% this year after gaining more than 16% in 2012 so it is a hot segment after lagging in 2011.  You can see all that under the Performance tab at the top of the Tearsheet.  We have also added pages showing Product Info and Fund Flows for most products although not yet for this one.

Back to the Summary page, PSCI’s pie charts are all red, like most sector funds, until you scroll down to the industry and sub industry pies.  Scrolling over a slice will make it pop out so it is easy to read.  We get a lot of compliments on our holdings screen where you can see all of its 84 constituents without leaving the page.  Back at the top you can PDF the Summary Page for your due diligence file or to give to clients.

With 100% exposure to the US Dollar, PSCI is unshaken by the waves hitting the international currency markets struggling to assess Fed liquidity.  Small caps also tend to have more of their business in the US providing further insulation.  A low risk, high reward name that is outperforming, PSCI is the kind of idea for which you come to ETF Global^®, and we thank you for that. Please send any questions to support@etfg.com. 

Emerging Markets Still Scoring Well

As the financial media declares the emerging markets have submerged, Quant isn’t as dismissive but scores on recently highlighted funds have come down with poor tape action.  China’s GXC and FXI have held up best at 2^nd and 5^th place today with the former still retaining the 10 Green Diamond Reward Rating.  The PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV) has managed to stay in the top 10 at 8^th place but the other 2 EM funds that also dominated the ranks on August 12^th, GMM and DEM, have slipped down to 25^th and 48^th place.  The slippage comes on the Behavioral side as strong fundamentals look even better with lower prices.

The weakest of the group, DEM has seen its technical score come down from 60.6 on August 12^th to 24.6 today as the fund has lost 3%.  That has brought out some bears to boost its sentiment score up to 68.5 but not enough to offset those very weak technicals.  Value investors have to love its very strong 90 Fundamental Score keeping it in the upper ranks.  GMM’s chart since then looks similar to DEM’s but longer term looks better as does its 55.8 technical score.  Better performance usually correlates with weaker sentiment but at 53.8 it is enough to keep GMM’s Behavioral Score above 50 and its 88 Fundamental Score keeps it in the top 25.  EELV sees both Behavioral categories below 50 but its 97.9 Fundamental Score says it is about as cheap as it has ever been in its 19 months of trading.  GXC and FXI have been with us since before the crash and also score well fundamentally.  Launched in March of 2007, GXC’s 98.2 might not look as good if it had been around since 2004 like FXI with an also strong 80.6.  Technicals have come down below 70 today for each and FXI has better sentiment readings as its 25 constituents have attracted more bears than the 213 in GXC.  Both China funds are exposed to Hong Kong dollars which have avoided the brunt of the emerging markets selloff this week.

Today’s release of Fed minutes may alleviate or exacerbate that volatility and so might the presentations in Jackson Hole later this week.  Quant has backed off its emerging markets stance somewhat but hasn’t given up.  We will watch it over coming days so please check in each day to ETF Global^® Daily Perspectives.

Hideout in Canada

Since the days of Viet Nam, Canada has been a good place to hide from trouble.  ETF Global^® has not been around that long but since we began ranking and rating ETFs last summer, we have noticed today’s 5^th place iShares MSCI Canada Index Fund (EWC) has also been a good place to hide when bullets were flying around the US market.  That was the case last fall when we were fighting fiscal cliff fears and it has been the case over the past month when the S&P 500 has lost over 3%. Since its inception in 1996, the fund has matched the S&P’s gains but since the big bottom in 2009 it has lagged.  Could we be due for a reversion to the mean?

One result of lagging the market is a strong 79.2 Fundamental Score built on high 90s price/cash flow and price/book value scores.  The Canadian market may not be doing well but their economy has been doing fine which is also reflected in an upward trending Global Theme Score at 69 today.  Investors seem to notice because EWC’s sentiment readings average out to a middling score of 58.9 as the bears get bullish on this name.  Its recent outperformance contributes to a better 67.6 technical score which is off its highs but not far from its 73.1 peak on July 30^th.   Nobody doubts Canadian quality and EWC’s Quality Score comes in at 80.3 helped by good liquidity and a strong sponsor in iShares.  It shines similarly in our Diamond models with a strong 8.42 Green Diamond Reward Rating and a low 3.27 Red Diamond Risk Rating.  High reward and low risk are appealing attributes in our recently turbulent international equity markets.

There are two ways EWC could close its performance gap with the S&P since that 2009 low, either it goes up, our market comes down, or a combination of the two.  Investors haven’t made much money with it over the past few years but they haven’t lost money either.  If you have to be long in a turbulent environment, EWC fits the bill nicely.  With financial market combat heating up, we hope that performance gap closes in the good way and we thank you for checking in with ETFG Daily Perspectives for the latest messages from our proven models.  Please send any questions to support@etfg.com. 

Clouds

We don’t know if we shall ever see 

growth prospects as bright as in technology.

Earnings have come in clear and loud 

with the highest growers in the cloud.

Not all beanstalks built on hope 

but many companies proving they can cope

with creative destruction changing the land, 

these aren’t castles made of sand.

Turning in growth by hook or by crook, 

a prime example is the resurgent Facebook.

It’s the top holding in the First Trust ISE Cloud Computing Index Fund,

today’s 6^th place ranker jumping 23 spots with 8.8 Green Diamonds.

Its excellent 79.8 Fundamental Score 

suggests its recent rally is primed for more.

Decent mid 60s Behavioral numbers have remained, 

as technicals weekend but sentiment gained.

Trading under the ticker SKYY, 

its 40 constituents range from Zynga to Akamai.

Including titans like IBM and SAP 

and mid tier firms like NetFlix and NetApp.

It’s an eclectic mix compiled by ISE, 

rebalanced and reconstituted semiannually.

4.85 Red Diamonds is close to average 

so buying SKYY does not need courage.

Don’t be spooked by Cisco’s terminations, 

it may be time to add to this allocation.

The cloud is shining bright, its owners making cash.

Happy birthday to the late Ogden Nash.

ETFG Diamonds Shine Bright

Since today’s 10 Green Diamond SPDR S&P China Fund (GXC) reacquired that distinction on July 12^th it is up almost 9% as the S&P 500 has declined by over 1%.  That run is not factored into our latest performance report that covers selections made up to July 1^st, the last day for which we have 1 month performance as of July 31^st.   Like its related Quant model, our Green Diamond Reward Ratings have done an excellent job identifying the best parts of the international equity markets for the intermediate term.

We group the selections by number of Green Diamonds assigned each day and compare the 7s and better to the S&P 500 over rolling 1, 2 and 3 month periods.  Also like Quant, our numbers came down from lofty heights earlier this year as most of 2013 favored US broad market funds that basically track the benchmark.  The numbers also took a hit after selecting the gold miners fund before their spring crash.  That was humbling and we hope you used stops but we are glad to have selected those US broad market funds that led the world for so many months even if it dinged our relative numbers.  The model has proven its value again by separating from the benchmark right before it began to falter over the past month.  However, our 3 month numbers still bear those winter bruises as the 2 month heal but our 1 month are back to the races.  That does not include GXC’s 10 Diamond run but it does include PWO which similarly dominated the Green Diamond model for most of the spring and outperformed handsomely.  It has dropped down to the low 7s with its latest quarterly reconstitution which is underperforming.  That is a risk with smart beat funds that can change substantially each quarter.

We do not measure the performance of our reflective Red Diamond Risk Ratings because they are not predictive.  Our Green Diamond Reward Ratings, along with our Quant scores have proven to be even more effective than their numbers suggest.  We are glad to finally get some separation from the benchmark with the emerging markets funds that are performing so well.  Not many other sources were recommending emerging markets after the June swoon and nobody else reports on the performance of their ratings.  Thank you for recognizing the value of ETF Global^® and have a nice weekend. 

Quant Beats the Market

It is that time of the month where ETF Global^® does what nobody else does, we report on the performance of our scores and ratings.  We will cover Quant today and you can follow along on the August performance report found under the ETFG Quant button.  We segregate the top 10, 25, 50 and 100 ranked funds each day and measure their average performance over the forthcoming 1, 2 and 3 months.  Most advisors benchmark against the S&P 500 so we then compare those average performance numbers to the corresponding benchmark performance over the same rolling time periods.

If you have been with us for the last year, you know our numbers came down from the stratosphere early this year as the model moved from an international weighting in late 2012 to US broad market funds like those tracking the S&P 500 for most of 2013.  It is hard to beat the index when you are weighted towards it but we are happy to have kept our users in those safe harbors as the rest of the world was suffering bear markets.  It wasn’t all safe though as the gold miners in GDX ranked very well through much of the winter and crashed in the spring. Some of that still affects our 3 month numbers but they are getting better.  Our 2 month numbers weakened in this report mostly due to some European selections in early May that were at lows after the late June swoon.  Those have generally outperformed since then as the market cheers the end of the European recession.  Our 1 month numbers picked up nicely as selections made in mid to late June have once again begun to provide positive separation from the benchmark.  Recent emerging markets selections are continuing the outperformance and even GDX is outperforming since getting back to the top 10 in July.  That will be covered next month however.

Quant’s recent shift to the emerging markets has been almost as pronounced as its previous one towards the US late last year.  Like its other shifts, the model has made the correct moves despite their contrarian nature.  That is the beauty of the quantitative method.  The first couple of times could be considered lucky but it has become a trend over our first year serving you.  We will cover our Green Diamond Reward Ratings tomorrow, thanks for checking in to ETF Global^® today. 

Remembering the Blackout

10 years ago today, Wall Streeters ended their day frantically walking down staircases and jamming into uptown buses, if we weren't buying discount meat and perishables. Without computers and TVs, we didn't know a great blackout had darkened the entire US northeast after some trees downed a power line in Ohio.  We want to mark the anniversary with another look at the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID).

We highlighted GRID on July 9^th in frustration over Con Edison’s rolling brownouts during the summer heat wave.  Tracking a smart beta index that rebalances quarterly and reconstitutes semi-annually, it had just paid its largest dividend which sent its yield score to 100 and rocketed the fund out of the triple digits and into the top 10.  That yield still scores 100 and is confirmed by an also exceptional 96.3 price cash flow score as the government showers money on its constituent smart grid infrastructure providers.  You don’t need earnings or book value to get the government’s love and both of those categories score around 50 but the four combine for a decent 74.1 Fundamental Score today.  The fund is up nicely since that July 9^th post but its Behavioral Score has come down from 65.5 to 60.9 thanks to its sentiment score dropping with its implied volatility.  Good Global Theme and middling Quality Scores all combine for a 67.4 Total Score which is good enough for 22^nd place today.

Some of those weaker Quality metrics contribute to GRID’s higher than average 5.38 Red Diamond Risk Rating which is similar to those China and emerging markets funds in the top ranks.  Its 7.28 Green Diamond Reward Rating would probably be higher if GXC was not still skewing the curve.  Now that the heat wave has broken, our power supply has been uninterrupted but the autumn storms loom and the last two years have seen additional blackouts after Irene and Sandy.  Another season like that could remind more investors that our electrical grid still needs to be smarter.  GRID's 22^nd place rank today is down from 3^rd place on July 9^th but up from 73^rd place 2 days ago.  When we post our monthly performance reports in coming days, you will see that 22^nd place signals it will continue to outperform in coming months.  Thanks for reading and as always, please send any questions to support@etfg.com.

GXC Skews the Curve

On April 12^th we noticed a potential problem in our Green Diamond model as there were no 9 Diamond funds that day and the issue repeated the next day.  When it happened again in May, we knew it was not a problem but a case where the 10 Green Diamond fund dominated the model to such an extent that its next closest ranker could not get above 8 Green Diamonds.  The PowerShares Dynamic OTC Portfolio Fund (PWO) went onto to skew the model in such a way 13 times.  If you bought on any of those days you are happy now being up more than 14% since April 12^th versus the S&P’s 6%.  Sorting today’s ETFG^sm Scanner output by Reward, you will see the issue has repeated again.

This time it is with the SPDR S&P China Fund (GXC) earning the 10 Green Diamond distinction for the 10^th time since July 12^th.  When we highlighted it on August 8^th we said it looks like it is just getting started and Quant says you still have a chance to get on board. Its 98 Fundamental Score is the best out of all 724 equity ETFs getting scored today with all 4 subcategories getting high 90s.  158 other funds score better than its strong 73 technical score but all of those have sentiment more bullish than GXC.  At 73.9, only 11 other funds have better sentiment readings but they tend to have technical readings in the 40s and 50s.  It is a nice opportunity when both Behavioral subcategories score so well.  Those are the scores that account for the Green Diamond Reward Rating and no other fund comes close today.

GXC’s 5.67 Red Diamond Risk Rating is higher than average driven by an 8.11 Deviation score which is well explained with a look at its chart.   After a great run last fall, it dropped out of the top 100 and began a 20% correction a few weeks later but looks ready to do it again.  We hope it performs as well this time or as well as PWO which has dropped out of the top 100 on poor sentiment. PWO’s portfolio has also changed so if you still own it consider swapping into GXC or a better scoring smart beta fund.  Only ETF Global^® brings you such actionable opportunities and we thank you for checking in to see them each day. 

Emerging Markets Dominate

We begin the week with 3 emerging markets funds in the top 10 joined by 2 China funds and one representing India.  Europe gets 10^th place leaving only 3 top 10 positions that are held by US funds which are the familiar 1^st and 2^nd place XME and XOP and 6^th place TTFS which we highlighted on July 5^th.  So as WSJ declares the emerging world is losing its growth lead, Quant says not so fast.

We highlighted today’s 10 Green Diamond GXC on Thursday and it continues to score and perform well as does FXI with similar exposure; they rank 3^rd and 4^th respectively.  The 3 emerging markets funds ranked 5^th, 7^th and 8^th are the PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV), SPDR S&P Emerging Markets Fund (GMM) and WisdomTree Emerging Markets High-Yielding Fund (DEM).  Like the China funds, all 3 rank highly thanks to strong Fundamental Scores led by EELV’s 97.9 with the other two getting close to 90. Behavioral Scores are not as strong but maybe today’s newspaper will drive some bears into the sector to boost the contrarian sentiment readings.  Technicals are good but not great in the low 60s but will get better if they continue to trade as well as they have in recent days.  India’s 9^th place INXX has not traded well since we highlighted it on June 26^th with a warning about its high Risk Rating and dependence on the weakening Indian Rupee.  The currency hit an all time low last week but is getting a bounce today on central bank pledges to curb its supply.  The fund got a similar bounce but still gets a technical score below 50 although sentiment is better at 68 and fundamentals are excellent at 97.3.  Closing out today’s top 10 is the SPDR DJ Euro STOXX 50 Fund (FEZ) which we highlighted last Wednesday.

Pre market trading suggests this emerging markets stance is going to continue to outperform today.  The emerging markets may be slowing but are still registering growth rates at multiples of the developed world.  With the US trading near record highs, Quant has become enamored with these funds that have already had meaningful corrections this year.   Thank you for becoming enamored with ETF Global^®, good luck this week and congratulations to emerging PGA golf champion Jason Dufner.

Liquidation Watch List Hits Record High

The ETF industry continues to grow but is also consolidating and leaving many products at surprisingly low asset levels. The trend has resulted in a record 79 products meeting the three criteria for inclusion on the ETF Global^® Monthly Liquidation Watch List.

ProShares and iPath account for more than half of the 79 names and each sponsor has three additions to this month’s list.  The 22 iPath products account for more than a quarter of that sponsor’s 81 issues and the 24 from ProShares account for 17% of their 141 ETFs.  Having so many products with less than $5 million under management, after trading for more than 2 years, may indicate that these sponsors have business models that are viable with small funds.  However, those 2 criteria could be too much to overcome if the sponsors decide to improve their margins by trimming their offerings. 

Barclays could do that by consolidating their 7 specific iPath industrial metal ETNs that appear on this month’s list into their single broad industrial metal ETN (HEVY) which also appears.  The 8 products have a combined AUM of less than $16 million and generate less than $130,000 in total fees.  The 24 ProShares ETFs tend towards the leveraged short category tracking niche indices hitting new highs month after month.  With only $758K in AUM, markets would not miss the ProShares UltraShort Russell MidCap Value Fund (SJL) especially considering that ProShares has 3 other leveraged short mid cap funds.  All of them meet the third criteria of negative performance over the past year which could be the final straw for sponsors looking to boost margins; even if closing a bunch of short funds could signal a market top. 

Other sponsors have trimmed their offerings by closing funds that were larger than these iPath and ProShares products.  It is impossible to know the full effects of those closures but you should look to avoid the slippage that can result from a liquidation.   We quantify the monthly list and write about it at Wealthmanagement.com as another tool to keep you in the best products available in the burgeoning ETF marketplace.  

Our predictive Quant model ranks the SPDR S&P Metals and Mining Fund (XME) in first place to close out the week and SPDR’s S&P China Fund (GXC) gets today’s 10 Green Diamond Rating again.  Thank you for placing your trust in ETF Global^® and have a nice weekend.  

China’s Silver Bullet

The Lone Ranger did not help Disney but China has ridden in on its white stallion this morning with positive economic data to rescue world equity markets. The country’s exports and imports were both ahead of expectations suggesting the world’s makers and takers are saddling up.  Regular readers may not be surprised as we have been highlighting China funds since they began to score well last month.  Today’s 10 Green Diamond SPDR S&P China Fund (GXC), gets that distinction for the 7^th time since we mentioned it on July 12^th and 4 of those were in the last 5 days.  It has outperformed the market since then and it sounds like the William Tell Overture is just beginning.

Most striking is its stellar 99.5 Fundamental Score saying it is about as cheap as it has ever been since launching in early 2007, all four fundamental sub scores are above 99.  Behavioral is not as strong at 59.7 with technicals a little better than sentiment which is not as bearish as Quant likes to see.  The Geographic Exposure on its ETFG^sm Tearsheet shows 83% in China which we calculate according to the headquarters of the fund’s constituents.  GXC has outperformed China’s struggling Shanghai Index because those constituents are the ones available to foreign investors which are listed in Hong Kong.  This is reflected on the Currency Exposure chart showing 89.4% to the Hong Kong Dollar, so the better performing Hang Seng Index is a more relevant benchmark.  The Sector Exposure shows about a third of its 215 constituents in financials but the other industry and sub industry charts show that sliced thinner among many diverse industries.  Please notice the new tabs at the top of the Tearsheet where we break out performance, fund flows and other important information.  Both of those metrics have shifted from negative to positive in recent periods.

Like yesterday’s FEZ, our models have done an excellent job calling GXC.  It was a top ranker from last August through December when it was leading world markets but dropped out of the top 100 in early January before suffering a 20% correction.  Like much of the world, it bottomed on June 24^th and was back in the top 10 a few days later.  With calls like that, you can consider ETF Global^® to be your Tonto (without the dead bird on our head). Yippie ki-yay Kemo Sabe. 

FEZ likes Mark Carney

New Bank of England Governor Mark Carney made his debut monetary policy announcement today saying he will keep interest rates low and maybe expand further until  unemployment in the UK falls to 7%, which he anticipates will take about two years.  The dovish policy is in line with expectations which contributed to the SPDR DJ Euro STOXX 50 Fund (FEZ) moving up to 9^th place.  It has had a choppy year of trading and Quant has done a good job calling the wiggles. 

It made the top 10 for the first time last August before going on a world leading 20% run. High Fundamental Scores and bearish sentiment gave FEZ the 10 Green Diamond Reward Rating on 17 days in August and September.  It fell out of the top 50 on a number of days in the early autumn but got back to the top 10 at a low in mid November.  Fundamentals were not as high then but sentiment drove it back to the upper ranks.  It began to lose top 50 status again in December as fundamentals and sentiment deteriorated even as technicals improved.  Its next trip to the top 10 was in late February after a 10% correction helped get those fundamental and sentiment scores back up, this time as technicals weakened. Poor earnings reports dinged the Fundamental Score through much of the spring but high sentiment scores kept the fund in the top 50 for most of the time. It dropped out of the top 100 in mid May after clawing back that 10% winter correction.  Traders who used the exit from the top 100 as a sell signal were glad as the fund went back down to its prior lows in the worldwide late June swoon.  It made it back to the top 50 on July 9^th, top 20 on July 16^th and top 10 this week.  Today’s 9^th place rank is driven by a 76.8 Fundamental Score and 73 technical score although current bullishness on Europe has brought sentiment down below 60. 

Traders have done well with FEZ when it has ranked in the top 10 and long term investors have had to endure some volatility but are net positive from any of those points.  If you don’t mind its higher than average 5.26 Red Diamond Risk Rating, FEZ looks like a good way to ride that Bank of England liquidity.  

Quant Likes Smart Beta

PowerShares had their quarterly reconstitutions and Quant sees a lot to like.   We refer to their Dynamic series of smart beta funds that select new portfolios every quarter using an algorithm to calculate various technical and fundamental data points.  3 funds tracking NYSE Intellidex sector indices make today’s top 10 with another in 11^th place.  All 4 moved into the elite ranks on sharply higher Fundamental Scores reflecting their new portfolios.

The financial fund, PFI, ranks best at 7^th place on an 85.8 Fundamental Score showing the portfolio is cheap on a cash flow, book value and yield basis but not as impressive on earnings.  The first 3 score in the mid 90s and PE scores 55.  None of these funds have options so their put/call scores default to 50 but PFI’s other sentiment readings are enough to score an OK 61.4.  Its marginally better 66.1 technical score combines for a 63.8 Behavioral Score which reflects fund level data rather than the constituents.  In 8^th place, PXE tracks the energy E&P sector with a 71.3 Fundamental Score driven by a 96.7 cash flow score.  On the Behavioral side, it gets a 65.1 with a closer balance between technicals and sentiment.  Their networking fund in 9^th place, PXQ, is all technicals on the Behavioral side with its 53.9 sentiment score reflecting the bears’ disinterest in the face of a decent 71.4 technical score.  The market’s wisdom is reflected in the fund’s 80 Fundamental Score.  The broad energy sector fund, PXI, has been quietly climbing the ranks until getting a boost to 11^th place today from its Fundamental Score rising to 71.2 after getting its new portfolio.  Technicals and sentiment are high 60s across the board except for its 50 put/call score.

Quant has lost its affection for the PowerShares Dynamic OTC Portfolio Fund (PWO) which dominated the model in the spring and early summer and has performed so well.  Its sentiment score has dropped to 38.4 and technicals are still strong at 73.1 but falling as the long term deteriorates.  Fundamentals fell from 80.6 to 71.4 on the new portfolio which resulted in the fund falling down to 182^nd place today.  We don’t give sell signals in this space because every investor has different objectives but this could be a good swap candidate for those who have done so well with it.  Thanks for checking in today with ETF Global^®.  

Emerging Markets Rising

Quant’s recent affection for China and other emerging markets has become more pronounced with 10 of today’s top 25 funds fitting those categories.  The now familiar China funds, GXC, FXI and FCHI hold 1^st, 3^rd and 8^th place this morning. WisdomTree’s Emerging Markets High-Yielding Fund (DEM) has gotten many mentions since the late June selloff and remains in 5^th place and new to this space is the PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV) rocketing 500 places into 9^th place on an improved Fundamental print and better short and intermediate term technicals.

Looking deeper than the top 10, we find the theme gaining strength with other big movers into the top ranks.  WisdomTree’s EM small cap DGS jumped almost 200 positions into 12^th place and SPDR’s S&P Emerging Asia-Pacific Fund (GMF) gained 33 positions into 17^th as their broader EM fund, GMM, jumped 48 positions into 26^th place tied with the WisdomTree Asia Pacific ex-Japan Fund (AXJL) which gained 73 places.  ADRE has been scoring well since early July and remains in 19^th place today after dropping 13 positions as other funds score better.

Other country specific names in the emerging space are also scoring well.  We had thought Egypt’s 13^th place EGPT moving into the upper ranks in mid June was a mistake as the fund traded lower but it closed Friday above a resistance line going back to April which has boosted all three technical sub scores.  On June 26^th we said calling bottoms is tricky when we highlighted India’s 24^th place INXX.  Closing at a new low Friday, it has not enjoyed the rebound of other EM countries but its Fundamental Score has done nothing but rise, up to 97.3 today even as its technical score falls to a lowly 33.1.  The Market Vectors Russia Small-Cap Fund (RSXJ) has done better since that June low and gets its first mention today after another rocket move of 261 positions into 37^th place.

Most of the big movers have resulted from better Fundamental Scores as earnings reports hit the data stream.  The financial media have been heralding better than expected US earnings despite year over year declines and extraordinary charges that are not overlooked by Quant’s algorithms.  A clear example of the benefits of ETFG's quantitative method is the ability to cut through the noise and keep the important historical facts in perspective. Thanks for recognizing that and good luck this week. 

ETFG Utility Goes Beyond ETFs

Bank of America says they serve 57 million customers and when you inundate that many Americans with constant niggling fees you should not be surprised to become an easy target for enterprising government officials looking for scalps.  In a filing yesterday, the bank disclosed it is under investigation by the SEC, Justice Department and New York Attorney General.  The investigations that seem to come as frequently as their innovative fees have forced the bank to set aside more than $42 billion in litigation expenses. Maybe that is a small price to pay for an otherwise profitable strategy, or maybe you want to avoid owning a company in constant warfare with customers and regulators.  ETF Global^® makes it easy for you to see which exchange traded products are exposed to any company.

Entering BAC in the upper right search box (hit your escape key to eliminate the drop down choices containing those letters) brings up those products that hold shares in the bank or track an index containing it as a constituent.  Of the 77 products that appear on BAC’s Equity Grey Market Report, 21 of them fall in that second category and will not appear on any other sites you might use for such information.   Only ETF Global^® has quantified the exposure of individual equities to the leveraged and inverse universe of ETPs.  People debate how these products ultimately get hedged against their underlying securities but you do not need to have an opinion on that to want to know the potential exposure.  In the summary section we differentiate between long and short products and we weight by the applicable leverage factors.  You can see that more than 3% of Bank of America’s market capitalization is exposed to ETPs.

Under the Research button, we have also compiled the S&P Grey Market Report summarizing all 500 individual equities in one place.  ETFG^sm Equity Grey Market data is example of why even managers who have yet to embrace ETFs use ETF Global^®.  Our Quant scores and Risk and Reward Ratings also provide guidance on their sector and regional allocations, as do our indices.  There are no financial funds in the top 50 today and only 4 of the top 10 are US funds with Asia continuing to score well, such as today’s 10 Green Diamond GXC.  Thanks for reading and have a nice weekend.

Wait Until That Deal Comes Around

Since it costs a lot to win and even more to lose, you and ETFG^sm need to spend some time wondering what to choose.  The upper ranks continue to offer a wide assortment of US and emerging markets funds and the gold miners in 7th place GDX are actually outperforming lately.  So watch each card you play and play it slow and wait until your deal comes around.

We’ve been writing Daily Perspectives for 10 good solid months but have yet to mention 3 technology funds appearing in today’s top 10. The 3^rd place Powershares Dynamic Technology Fund (PTF), 8^th place SPDR Morgan Stanley Technology Fund (MTK) and 10^th place Guggenheim S&P Equal Weight Technology Fund (RYT) are all enjoying their best ranks yet as they outperform the broad market since the late June low.  That performance has pushed their technical scores up to the high 70s with MTK taking a hit yesterday to 71.7. The positive price action is beginning to get the bears dancing with PTF and RYT seeing high 80s short interest scores driving sentiment scores up to the 60s.  MTK is the exception with low short interest and a 44 sentiment score but leading the group on the Fundamental side with a score of 80.5.  It also carries the highest risk of the 3 with 5.18 Red Diamonds.  Smart beta PTF does best in the Diamond model with 9.79 Green Diamonds and a 3.78 Red Diamond Risk Rating.  However, that Reward Rating will change when its portfolio reconstitutes this month.

Let us pour some wine for you and tighten up your shoes, we hate to leave you anywhere composing lonesome blues.  If you think that tech deal has already gone down, today’s top 10 has four other sectors represented as well as China’s FXI tied at 3^rd and Powershares smart beta emerging markets fund, ADRE, in 6^th place.  Even Europe is showing up in the upper ranks with Switzerland’s EWL in 11^th place.  Check it all out on the Quant page where you can sort by whichever scores interest you most.  Only ETF Global^® brings you a sophisticated quantitative model to cut through all the noise and select those ETFs most likely to outperform the rest. So don’t let that deal go down until you have done your research on ETFG^sm.  Thanks for reading and happy birthday to the late, great four fingered Fat Man.