ETF Prime Archive

Playing Egypt With ETFs

As investors continue to turn to international markets for diversification, a hedge against the dollar and amplified rates of return, ETF provider, Van Eck Global has taken it a step further by offering the first ever exchange traded fund which gives country specific exposure to Egypt.

The Market Vectors Egypt Index ETF (EGPT) gives investors exposure to small, mid and large cap Egyptian stocks.  It holds 28 different stocks of publicly traded companies that are both domiciled and primarily listed on an exchange in Egypt or that generate at least 50% of revenues in Egypt.  As for sector breakdown, 42.5% of its assets are allocated to financials, 18% to telecommunications, 15% to industrials and 14.8% to the materials sector.  EGPT carries an expense ratio of 0.94% and has roughly $2 million in assets under management.

Egypt is attractive because it is the third largest economy in Africa and is expected to witness growth greater than most developed nations in 2010.  Historically, Egypt has seen nice growth trends, boasting average annual GDP growth of 4.9% since 2000 and 6.3% for the last three years.  Additionally, the nation is attractive due to its supply of natural resources – more specifically, crude oil, natural gas and iron ore. 

Some other ways to gain exposure to Egypt include the Market Vectors Africa Index ETF (AFK), which allocates nearly 20% of its assets to Egypt and the SPDR S&P Emerging Middle East & Africa (GAF), which allocates slightly over 5% of its assets to the country.

Metals ETFs Expand Their Family

As emerging economies continue to grow and developed economies mend the wounds from a global financial crisis, the demand for metals has surged.  In fact, some metals are in such high demand that ETF provider First Trust has responded by launching the first equity-based platinum and copper exchange traded funds.

Demand for copper and platinum is especially high due to their industrial and manufacturing uses, their ability to enable investors to gain exposure to foreign markets and their ability to enable investors to hedge positions against the U.S. dollar.

Copper is heavily used in construction with its capability as an excellent conductor of electricity and because it corrodes slowly.  Additionally, copper is an important ingredient in many alloy metals and is typically included in finishings that involve brass, German silver and sterling silver.

As for platinum, it’s commonly used in automotive catalytic converters, which control emissions.  Additionally, platinum is used in the medical research industry and is often a sought after metal in fine jewelry. 

The outlook for both metals remains bright and can be played directly through these new ETFs which include:

• First Trust ISE Global Copper (CU) which tracks companies directly involved in various aspects of copper mining, refining or exploration.  CU carries an expense ratio of 0.70% and enables investors to gain access to Canada, the United Kingdom and Peru.
• First Trust ISE Global Platinum (PLTM) which holds companies who are linked to the platinum and palladium industries.  PLTM carries an expense ratio of 0.70% and provides exposure to South Africa, Canada and the United Kingdom.

In addition to these new ETFs, one can play these metals through the following exchange traded notes (ETNs):

• iPath DJ UBS Copper (JJC), which carries an expense ratio of 0.75%.
• iPath DJ UBS Platinum (PGM), which carries an expense ratio of 0.75%.
• UBS E-TRACS Long Platinum (PTM), which carries an expense ratio of 0.65%.

Keep in mind that ETNs are a little different than traditional ETFs, in that they are debt instruments and carry the risk that the issuer could potentially default.

International ETFs Are About To Get Interesting

The appeal and demand for investments that track international markets continues to grow, leading exchange traded fund (ETF) providers to continue their innovation and introduce new products.

Internationally themed ETFs, especially those that track emerging markets, are attractive because they offer diversification, a hedge against a weak U.S. dollar, exposure to economies which are expected to grow at faster rates and the opportunity to gain greater than average returns.  Although these markets can offer numerous advantages, it is equally important to keep in mind some their disadvantages, such as higher risk, political instabilities and lack of liquidity.

Despite some potential disadvantages, the family of emerging market ETFs has grown tremendously.  There are over 100 different emerging market ETFs investors can choose from ranging from a broad based ETF like the heavily traded iShares MSCI Emerging Markets Fund (EEM) to one that specifically tracks a sector like the Claymore China Technology ETF (CQQQ). 

To take it a step further, ETF provider Market Vectors is currently in registration with the Securities and Exchange Commission (SEC) to launch the Market Vectors Emerging Markets Local Currency Debt ETF.  According to its prospectus, this ETF will utilize derivatives to reflect the performance of an index of fixed-rate sovereign debt, supranational issues and corporate bonds with at least one year of maturity.  It will offer a way for investors to gain diversified exposure to emerging markets with a little less risk than a traditional equity based ETF.

In the world of country specific emerging market ETFs, ProShares is planning on widening its product offerings with the introduction of the first ever country-specific leveraged international ETFs.  The ETFs include:

• Ultra MSCI Brazil
• Ultra MSCI Pacific ex-Japan
• Ultra MSCI Europe
• Ultra MSCI Mexico Investable Market

These ETFs will add to ProShares’ already established arsenal of broad based leveraged and inverse emerging market ETFs such as:

• ProShares Ultra MSCI Emerging Markets Index Fund (EET)
• ProShares UltraShort MSCI EAFE Fund (EFU)
• ProShares UltraShort MSCI Emerging Markets Fund (EEV)
• ProShares Short MSCI EAFE Fund (EFZ)
• ProShares Short MSCI Emerging Markets Fund (EUM)

Nuclear Energy and Its ETFs

As global populations continue to multiply and manufacturing starts to expand in developing nations, the demand for electricity will likely follow.  With this in mind, it’s important to consider how and where nuclear energy fits in to meet this growing demand.  In fact, in the United States, nuclear energy is the second most common way to generate electricity, closely behind coal.  As for its uses around the world, countries like Lithuania, France, Belgium and Sweden generate more than half of their respective nation’s electricity via nuclear energy. 

In addition to being an excellent source to power an economy, nuclear energy is relatively clean.  Nuclear energy plants produce electricity through the fission of uranium, not the burning of fuels.  Consequently, nuclear power plants do not pollute the air with nitrogen oxides, sulfur oxides, dust or greenhouse gases like carbon dioxide.  Another important benefit that nuclear generated energy has on our environment is that the wastes produced are completely isolated from the environment.

Nuclear energy’s benefits make it not only economically viable, but politically attractive.  Most recently, President Obama announced more than $8 billion in loan guarantees to build the U.S.’s first nuclear power plant in nearly 30 years.  In addition, the President is pushing his energy bill which assigns a cost to the polluting emissions of fossil fuels so that nuclear fuel becomes more affordable.

The benefits of nuclear energy seem to be moving to the forefront in the energy sector and will likely continue to do so.  Investors wishing to make a play on this sub-sector can do so through the following ETFs:

• Market Vectors Nuclear Energy (NLR), which holds 23 different companies that deal with nuclear energy and carries an expense ratio of 0.61%.
• PowerShares Global Nuclear Energy Portfolio (PKN), which holds 64 different companies who are involved with nuclear energy and carries an expense ratio of 0.75%.
• iShares S&P Global Nuclear Energy (NUCL), which holds 23 different companies around the globe who deal with nuclear energy and carries an expense ratio of 0.48%.

Massman Hosting Workshop at ETFs Investing Summit 2010

Joe Massman, President & CEO of The ETF Store, will be hosting a workshop titled “Examining Exchange Traded Vehicle Performance for 2010” on March 10^th at iGlobal Forum’s ETFs Investing Summit 2010 in New York.  ETFs Investing Summit 2010 will take a closer look at the vast pool of investment opportunities in the field of Exchange Traded Funds (ETFs) and will shed light on the latest developments in this growing arena.  ETFs remained resilient during the market crisis of 2008 and are expected to reach $1 trillion in assets by the end of this year.  A number of prominent speakers will discuss the attractiveness of ETFs in today’s economic environment, in addition to exchanging opinions on the latest ETF innovations, risks and strategies.

The workshop Massman is hosting will examine the entire ETF landscape, including ETF construction and composition, advisor usage of ETFs, and the tremendous asset-gathering potential of ETFs.  The discussion will center on actionable recommendations for implementing an ETF strategy in 2010.

Massman founded The ETF Store in 2008 to provide innovative investment solutions to individuals looking for alternatives to the commissions and high fees imbedded in the typical all-mutual fund portfolio.  Massman is also the founder of ETFBuzz.com, an online source for news and commentary about ETFs, and The ETF Institute, the first industry association for investment advisors utilizing ETFs in client portfolios.