Exchange Traded Funds (ETF)

[millionairemind]

Exchange-traded funds
Trillion-dollar babies
A fast-growing asset class

Jan 21st 2010
From The Economist print edition

NOT all financial innovations have come to grief in the credit crunch. The explosive growth of exchange-traded funds (ETFs), investment pools that are listed on stockmarkets around the world, continued throughout the past decade. At the end of 2009 ETF assets under management topped the $1 trillion mark for the first time, according to BlackRock, a fund-management firm. The industry’s assets were just $40 billion at the end of 1999.
http://www.economist.com/businessfinanc ... d=15331133

[winston]

According to the SGX, trading in ETFs rose 38% YoY in June.

[winston]

Lyxor aims at ETF boost
Wednesday, September 15, 2010

Lyxor Asset Management plans to launch six funds in Hong Kong during the next six months.

That comes with its bullish view of exchange traded fund markets in Asia.

The six products will be quantitative and guarantee funds, with investments ranging over Asia while some will be China-related, said Laurent Seyer. chief executive of the Societe Generale unit.

But a detailed timetable depends on distributors and regulatory approval, Seyer added.

Lyxor's expects ETF demand to grow in Asia, especially in markets with highly developed stock exchanges like Hong Kong and Singapore.

"An ETF is a good product and suitable for investor demands as it is easy to trade, with higher transparency and liquidity," Seyer said. Those features make an ETF "more attractive for investors after the financial crisis."

Currently, the firm has 20 ETFs listed in Hong Kong versus 170 globally.

Lyxor has assets under management totalling US$120 billion (HK$936 billion), with 49 percent of it in index funds and exchange traded funds.

BETH YE

http://www.thestandard.com.hk/news_deta ... 00915&fc=4

[greenhoney]

wow, looks like we are about to have an etf bubble?

[winston]

Most Overbought ETFs

Below is a list of the 30 most overbought ETFs that we track in our daily ETF Trends report. As shown, the Germany ETF (EWG) is the most overbought, followed by the Technology ETF (HHH), India (INP), Italy (EWI), and Austria (EWO).

Eight of the nine most overbought ETFs on our list are made up of foreign stocks.

The coloring of the dots in the charts shows whether the ETF has moved up (green) or down (red) relative to its range over the last week. While this is a list of the most overbought ETFs at the moment, nearly all have become less overbought in recent days.

An overbought security that has lost its momentum is exactly the type of scenario that short sellers are looking for.

http://www.bespokeinvest.com/thinkbig/2 ... -etfs.html

[iam802]

Investors Still Haven't Understood Leveraged ETFs

http://www.condoroptions.com/index.php/ ... aged-etfs/

When leveraged and inverse ETFs were first launched, many investors weren’t aware of the negative effects that daily rebalancing would have on the long-term performance of those ETFs relative to their benchmarks. Those potential problems are now more widely known, and coverage of leveraged and inverse products often includes the advice that they are best used as trading vehicles rather than investment products – i.e. to avoid investment shortfalls due to rebalancing effects, the holding period for positions using these products should be on the order of days, rather than weeks or months.
Research in the Winter 2010 issue of the Journal of Index Investing suggests that the message still hasn’t gotten through:

We find that many investors hold their leveraged ETFs for very long periods, at times longer than three months. Further, we calculate the shortfall of such a behavior compared to creating the leverage in a margin account. We find that some ETF inves- tors lose up to 3% of their original investment in just a few weeks, the equivalent of a 50% annualized return. This indicates that investors do not fully understand the risks associated with inappropriately using leveraged and inverse ETFs as long-term investments. (55)

The problem isn’t with the use of leverage as such. The graph below, from the paper, shows the relative outperformance for one fund (DPK) that would have been achieved by using a margin account instead of a daily rebalancing regime.



Another interesting finding is that rebalancing over other periods (weekly, monthly) improves results slightly on average, but inconsistently: some funds experience worse shortfalls at a monthly rebalancing horizon.
There’s a larger point to be made here, of which the matter of rebalancing ETF shortfalls is just one instance: the complexity of modern financial products clearly outstrips the ability of investors to understand them, even when they are relatively “sophisticated” (e.g. the kinds of people willing and able to trade inverse/leveraged products) and are presented with proper disclosures. It’s no fairer to rest all of the blame on individual investors than it is to scold a toddler for burning his hand after you have just explained the physics of exothermic chemical reactions with regard to stove top ranges. The problem is either with the products themselves or with the opacity of the disclosures. I’m not disposed toward banning products for being “too complex.” But every incentive on the side of banks, dealers, and other financial institutions is to refuse forever to present risks in sentences of English, instead of evanescent tissues of lawyerly obfuscation. This is something the Consumer Financial Protection Bureau will address, with any luck, for the most widely-used consumer products; the public interest would also be served by expanding the scope of plain-language mandates.

[winston]

5 PowerRatings ETFs for the Next 5 Days (as of Friday, January 21, 2011)

ETF / Symbol / PowerRating
1) Market Vectors Gold Miners ETF GDX 10
2) ProShares Ultra Basic Materials ETF UYM 10
3) ProShares Ultra MSCI Emerging Markets ETF EET 10
4) ProShares Ultra Technology ETF ROM 9
5) PowerShares QQQ Trust ETF QQQQ 9


Source: Trading Markets

[winston]

5 High Probability ETFs for the Next 5 Days (as of 1/26/2011)

Name / Symbol / RSI(2)
1) iShares MSCI Malaysia Index Fund EWM 0.88
2) Pharmaceutical HOLDRS ETF PPH 2.51
3) Health Care Select Sector SPDR ETF XLV 12.86
4) Regional Bank HOLDRS ETF RKH 26.93
5) iShares MSCI Brazil Index Fund ETF EWZ 32.43


Source: Trading Markets

[winston]

I guess these guys did not watch CNN about the situation in Egypt ..

5 PowerRatings ETFs for the Next 5 Days (as of Friday, January 28, 2011)

ETF / Symbol / PowerRating
1) iShares MSCI Emerging Markets Index Fund EEM 10
2) iShares FTSE/Xinhua China 25 Index Fund ETF FXI 10
3) iShares MSCI BRIC Index Fund ETF BKF 9
4) Vanguard Pacific ETF VPL 9
5) DIAMONDS Trust Series ETF DIA 9

Source Trading Markets

[winston]

High Probability ETFs for the Next 5 Days (as of 2/2/2011)

Name / Symbol / RSI(2)
1) iShares S&P U.S. Preferred Stock Index Fund ETF PFF 23.51
2) Retail HOLDRS ETF RTH 25.78
3) iShares MSCI Sweden Index Fund ETF EWD 26.49
4) SPDR S&P Retail ETF XRT 26.95
5) iShares Dow Jones U.S. Home Construction Index Fund ETF ITB 32.20


Source: Trading Markets