Archive for the ‘Exchange Traded Fund’ Category

Positive transportation figures, indicate good news for Malaysia ETF

CB018552Like many sectors of the Malaysian economy, the country’s transport industry has experienced a decline in activity due to the global recession. Though there are some signs that Malaysia‘s transporters are again moving in the right direction, other signals suggest a full recovery is still some time off.

There was mixed news for the transport sector in data released by the Department of Statistics on August 26, which showed that while still in recession, the rate of negative growth in the Malysian economy is slowing. Having declined by 6.2% in the first quarter of 2009, GDP contracted by 3.9% in the second, the curve being smoothed out due to increased public spending and positive growth in private consumption. This should be encouraging for the transport sector, which has seen productivity fall as demand for moving cargo locally and internationally plunged.

Less equivocal data indicating an improvement in the sector came in early August, with statistics showing a sharp rise in cargo-handling activity at Malaysia‘s ports. Movements of containers at the country’s 10 major ports rose by 10.2% in the second quarter compared to the first three months of the year, with 3.79m twenty-foot equivalent units (TEUs) being handled against 3.44m TEUs in the first quarter. Of the second-quarter figure, 2.49m TEUs was trans-shipment traffic, up 11.7% on the previous quarter; 670,718 TEUs carried exports, a rise of 10.2%; and the remaining 640,469 TEUs containing imports, a 4.4% increase.

While a solid performance, the six-month total of container movements was still down 7.7% on the January-to-July figure for 2008, though this decrease in activity is far less than that recorded by some of Malaysia’s near neighbours, with throughput at ports in Thailand and the Philippines down by 35% and 20.6%, respectively.

Another hint that the transport sector is on the road to recovery was a jump in commercial vehicle sales, which hit a six-month high in July, with 4800 units rolling off the lots, almost 20% higher than the previous month.

Exhibiting robust health is national carrier Malaysia Airlines (MAS), which posted its best-ever quarterly net profit in the April-to-June term, bouncing back from losses of $193.7m in the first quarter and $244m in the second. Key to the airline’s return to form was an aggressive advertising campaign, cost reductions, cutting fares on off-peak flights to increase passenger take up, and reversing losses on fuel hedging.

It is not just MAS that benefitted from the steep drop in fuel prices, one of the transport sector’s highest costs. In the 12 months to the end of July, transport charges had fallen by 19.9%, according to figures released by the Department of Statistics in mid-August, though this could reverse as the price of fuel has once again started to climb. Month on month, transport charges rose by 0.1% in July, in line with the overall movement of the consumer price index.

If, as is widely predicted, the Malaysian economy continues its push out of recession in the third quarter and returns to positive growth in the fourth, the upturn should carry the transport sector in its wake, especially if the pick up in domestic demand is matched by that in the country’s export markets. Our expectation is that this would confirm that the iShares MSCI Malaysia Index Fund (NYSE:EWM) is set to add to its succesful growth over the last 6 months. The Malaysia ETF has not exploded as some of its emerging market counterparts, but has shownsteady & sustained growth, with very little volatility. A solid buy in torrid times.

Malaysia ETF

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Hedged In on SDS, FXI & FXP as bears wake up early

kodiak-bear1Normally at this time of year, bears are getting their stores in & looking at hibernation, but the recent market has turned that around, with bears dozing most of the summer & now waking up & looking hungry.

Followers of our Twitter account, will know that we have been taking a good look at China over the past 10 trading days & have a very bearish outlook on China going into the 3rd Quarter & by default on the S&P 500. Signals have been coming for a while with the BDI declining at an alarming rate from it’s June highs, flagging up the possibility that China’s economy & associated infrastructure drive are starting to run out of steam.

The Shanghai Composite has been steadily declining. losing in the region of 21% of its value in the last month, today the benchmark index slumped an eye boggling 6.75% at its close. This has prompted me to look at a trade that I have been thinking about for a few weeks, that is neatly hedged & could also be a home run as bearish sentiment hits the markets again.

Shanghai_composite

Having looked at three well traded ETFs , we are placing a trade that is mixing it up a little with SDS :Ultra Short S&P 500, FXI :iShares FTSE/Xinhua China 25 Index & FXP ProShares UltraSh FTSE/Xinhua China 25. The following chart shows the last 5 trading days of SPY, FXI & FXP. As can be seen, there was a clear signal on Tuesday last, that there was a divergence in FXI / FXP, with the S&P 500 mainly trading sideways.

china_v_spy

Now using the Morgan Stanley A Fund CAF as a sentiment monitor for the Shanghai market over the same period against SPY (NYSE: SPY), it would seem that there has been some pretty good correlation over the last 6 months of trading. For me CAF is one of the best tickers to use for real sentiment, as it trades in China A Shares, whilst FXI (NYSE: FXI) is predicated on 25 stocks traded on the Hong Kong market (mostly ADRs). From looking at the charts, it would appear that CAF (NYSE: CAF) actually front runs FXI by a two to three day period & this has helped me immensely in trading Chinese ADRs this summer. At the same time, SPY has followed the FXI trend reasonably faithfully for the last 3 months, until August 17th, when FXI began to dip.

SPY_FXI_CAF

So our feeling is that with China declining at such a rapid rate, Long FXP  (NYSE: FXP) short FXI is a no brainer & we are looking to make some good returns over the next few weeks, we are also adding in a soupcon of SDS for interest & to confirm our bearish sentiment on the S&P 500. With a ratio of 2:1:1 we feel that this is a well hedged play, with a good upside potential.

We are looking to hold this trade for a minimum 10 day period & I have set this trade up on kaChing.com in our test account in order to track it. The idea being that we can give a visual on the performance of the trade & also  a good term of reference when we close out the positions & reblog.

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MyStockVoice.com is now alive & kicking

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It’s taken a while & it’s been an interesting experience, but am pleased to say that we released MyStockVoice.com into public beta. For me personally, there have been a few challenges, “assisted” along the way by re-locating with my family from Switzerland to Slovakia.

The team at Connection Services who have designed & support the MSV platform have been excellent, especially when responding to an ever changing set of requirements. MyStockVoice started as this WordPress blog, where I could muse on my views on Emerging Markets & BRIC economies. A conversation with a friend who works in the City (London) encouraged me to look at doing something a little more. The original format, was a forum, then a newswire service & now it’s a fully fledged blog publication platform. So you can imagine how happy my colleagues at CSL were, when I tripped back every few months & said “right, this is what we are doing now”

Our aim at MSV is to provide an ever widening audience with value insights into what is rapidly becoming a major topic for hedge funds, investment managers & retail investors alike : BRIC & Emerging Markets. International stocks traded on US exchanges are becoming ever more popular, especially via Depositary Receipts (ADR,ADS,ADN) , for the more cautious or long minded, a number of ETF (Exchange Traded Funds) have sprung up to service the appetite to take part in these growing economies.

Covering all the major regions, MSV provides focussed channels into a variety of sectors & also specific categories for Macro Econmics, ADR & ETF investing. We are pleased to be working with some well established names from the investment community, along with faculties such as Knowledge at Wharton, the Economics Faculty at Beijing University, Skolkovo Business School in Moscow & Cranfiedl University in the UK.

Our strapline is “your community … your voice”  & to reflect this, we will be bringing our readers plenty of new unique content. Much of my time in the last two to three months has been spent contacting individual bloggers & also online media services that are based in the regions covered. In this way, we can present a “blend of thought”, that will allow our subscribers to formulate informed opinions on their own particular areas of interest.

So, enough jawing from me, but to close, Alex, Chris & myself would like to thank the team at CS & all the people that have had input into the project. We sincerely hope that you enjoy the MSV experience & are always open to new ideas, partnership opportunities & most of all feedback.

Many thanks

Paul

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More pressure on copper as commodities start to fade

FCXFollowing on from my post last week “What goes up  must come down” , where I looked at the two largest producers of copper, Chile‘s Codelco & also the American firm Freeport McMoRan, I have spent some time over the weekend researching the copper market & looking to see if I could find anymore signals that would show market direction.

Re-capping on the trade, FCX so some very significant selling volumes from the open on Friday &  the trade triggered as FCX fell through the 65 mark, where I commited to 50% of my planned exposure, the remaning 50% was then entered at 64.25 & I rode this down to 63.06.  I am looking to repeat this trade as a swing this week & here are some of the reasons why.

As previously stated on Freeport McMoRan, the company has scaled back copper production & has increased gold production to an all time high. Freeport is making some serious cutbacks & cost management is a major theme, as with many other major stocks, so I am still bearish on FCX as a whole from a fundamental standpoint.

Whats more interesting, is looking at some other factors that help bear out (nice pun) my thesis that we are looking at short term oversupply of copper. First let’s have a look at the copper Exchange Traded Fund : JJC, it has seen a strong uptrend  since early this year, returning a tad over 100% year to date, however looking at this technical chart, it would seem to be overbought & is signalling this.

JJC

Turning to a shorter term chart & looking at volumes on JJC, we can see that it hit & refused it’s upper Bollinger on Thursday 13th & saw some very aggressive selling in high volumes on Friday. If we then look closer at the history of the ticker, it has a habit of withdrawing back to it’s 20 Day Moving Average, which would give a reasonable bottom at 36.90 on any significant breakdown. So, I am looking to take another short position in JJC (if I can, it’s pretty illiquid) & see if I can’t double up on my FCX trade.

JJC 3 month

Another indicator that all may not be well is the performance of the Base Metals ETF : DBB, which holds an equal 33.33% in copper, aluminium & zinc. DBB has also had quite a years so far, with a return rate of 53%, on Friday this started to look fragile & there was fairly spikey activity in the ticker all through the day, finally closing 3.8% down, so not a bright day for metals at all. Again looking at a 3 month chart, we can see that DBB has been hitting it’s head against the upper Bollinger since mid July & at the latter end of last week also refused. Needless to say that Friday saw some volumes selling off, although not as heavily as FCX & JJC. The reasoning behind this is that DBB is held by select financial institutions & they are unable to un-reel their positions very quickly.

DBB

So to summarise, FCX still looks weak, JJC in my opinion is looking to implode & the major ETF in this sector is on the retreat. Again, I’ll be looking at shorting Freeport down, as per the tactics from my last post & if I can get in on JJC, I’ll be tapping into a short there too, looking for an exit at around 38.50. If the sell off continues, next stop for me is the 34.20 mark, so I’ll look to drop the short at 34.50. Add to all this the negative sentiment on China  & commodities right now, I think these swings could be real earners for this week.

Author has no current holdings in any stock mentioned

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