Saturday, November 28, 2015

Fed Rate Outlook Dominate Recent ETF Activity - China & India

  • Gold held its ranking as the most active or second-most active ETF in the month of November. Prices are holding at five-year lows as stronger-than-expected US economic data spur investors to weigh the prospect of a Federal Reserve interest rate hike next month.
  • China remains in the spotlight, accounting for four of the 10 most active ETFs, as well as one of the best performers in terms of month-to-date total returns. Authorities have recently relaxed some emergency measures imposed during a major equities market rout earlier this year, while the impending entry of the yuan into the IMF’s SDR basket, and the MSCI’s inclusion of 14 US-listed Chinese companies in its indices effective 1 December, will keep investor interest high.
  • Concerns in India also remain elevated. The domestic equity market is headed for its worst monthly performance since August, led by foreign selling, after the defeat of Prime Minister Narendra Modi’s party in state elections in Bihar raised concerns about his ability to push through policies to boost the economy.
  • In the November 2015 month-to-date, the 10 most active ETFs were iShares MSCI India Index ETF, SPDR® Gold Shares, SPDR® Straits Times Index ETF, db x-trackers FTSE Vietnam UCITS ETF, db x-trackers MSCI Indonesia Index UCITS ETF, Lyxor ETF China Enterprise (HSCEI), db x-trackers FTSE China 50 UCITS ETF (DR), db x-trackers MSCI China Index UCITS ETF (DR), iShares JP Morgan USD Asia Credit Bond Index ETF and db x-trackers CSI 300 UCITS ETF.
Gold remains the most active or second-most active ETF in the month of November. Prices are holding at five-year lows as stronger-than-expected US economic data spur investors to weigh the prospect of a Federal Reserve interest rate hike next month. Demand for gold as a store of value diminishes in a rising interest-rate environment.

While business equipment orders in the US rose more than anticipated in October, and jobless claims fell to their lowest in a month, fourth-quarter GDP growth may still come in slightly weaker than some economists expect. Over the next week, markets are likely to focus on manufacturing data due 1 December, initial jobless claims on 3 December, and non-farm payrolls a day later, for clues on the outcome of Fed meeting on 16 December.

Futures markets now indicate a 72% chance of the US central bank raising rates at its December meeting, up from a 50% probability at the end of October, according to data tracked by Bloomberg.
Meanwhile, key emerging markets – China and India – continue to dominate ETF activity.

China stocks reversed a two-day gain, after investor optimism over the government’s easing of some trading restrictions faded, and doubts over the sustainability of the market’s rebound took centre stage. Authorities this month relaxed some emergency measures imposed during a rout that wiped out US$5 trillion from the equities market earlier this year, including resuming initial public offerings and scrapping a rule requiring brokers to hold daily net-long positions.

The impending entry of the Chinese yuan into the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket will also keep the country in the limelight, while the government continues to fine-tune monetary policy to shore up economic growth that remains muted, despite six interest rate cuts in a year.
Also adding to interest in Chinese equities is MSCI’s inclusion of 14 US-listed Chinese companies into its indices effective 1 December, mostly from the new economy sector.

Over in India, the domestic equity market is set for its worst monthly performance since August, led by foreign selling. Political opposition to Modi escalated after his Bharatiya Janata Party lost state elections in Bihar earlier this month, raising concerns over his ability to push through reforms to boost the economy.
Nonetheless, Indian stocks rebounded today – their first advance this week – on hopes Modi may be able to get the crucial goods-and-services tax bill passed in the parliament session starting Thursday. The GST bill became a key marker for progress after it was repeatedly blocked by opponents.

The other most active ETFs in the past week also include stock indices that track the developing markets of Southeast Asia, in particular, Indonesia and Vietnam.

Singapore’s 10 most active Exchange Traded Funds (ETFs) in the November 2015 month-to-date were iShares MSCI India Index ETF, SPDR® Gold Shares, SPDR® Straits Times Index ETF, db x-trackers FTSE Vietnam UCITS ETF, db x-trackers MSCI Indonesia Index UCITS ETF, Lyxor ETF China Enterprise (HSCEI), db x-trackers FTSE China 50 UCITS ETF (DR), db x-trackers MSCI China Index UCITS ETF (DR), iShares J.P. Morgan USD Asia Credit Bond Index ETF and db x-trackers CSI 300 UCITS ETF.

In the month thus far, these 10 most active ETFs averaged a 1.5% decline in total return, taking the one-year and three-year total returns to negative 6.1% and 5.6% respectively. The three best performers in terms of month-to-date total returns were db x-trackers CSI 300 UCITS ETF, db x-trackers MSCI Indonesia Index UCITS ETF and iShares J.P. Morgan USD Asia Credit Bond Index ETF.

The above-mentioned ETFs saw a combined turnover of S$99.7 million in the month thus far, which brought the total 12-month turnover to S$2.0 billion.

The three most active ETFs over the first 19 sessions of November were iShares MSCI India Index ETF, SPDR® Gold Shares and SPDR® Straits Times Index ETF.

The 10 most active ETFs in the November 2015 month-to-date are detailed below and sorted by MTD turnover

ETFs are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes, including local stocks, international securities, bonds, commodities or money markets.
Each ETF gives investors access to the performance of the asset that comprises the underlying index. Investing in the ETF is also less costly if one was to build a similar portfolio by buying the individual stocks. It also provides exposure to international markets and asset classes that may be inaccessible to individual investors.

Source: My Gateway

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