Through three rounds of quantitative easing, Operation Twist and
assorted other easing programs aimed at stimulating the U.S.
economy, it is easy for investors to get the impression that the
Federal Reserve is the only game in town when it comes to central
Of course, that is not the case as numerous central banks will
continue to wield significant influence over equity prices in
developed and developing nations across the globe. Making matters
all the more intriguing for investors is that the issues Central
Bank A must deal with often differ greatly from those faced by
Central Bank B.
For example, the Reserve Bank of India must contend with high
food prices (inflation) and slowing economic growth, while the Bank
must find ways to engineer inflation while
weakening the yen
Those are just two examples, but they underscore the notion that
could be affected by the whims of central banks in 2013. Here is a
more comprehensive list:
WisdomTree Japan Hedged Equity Fund (NYSE:
) It has been duly noted in recent weeks that DXJ has simply been
in terms of gathering assets
. DXJ had less than $520 million in AUM in mid-November, but that
number surged to almost $1.1 billion as of December 26.
The attraction to DXJ is more than just a soaring Nikkei 225
following the election of Shinzo Abe as Japan's next prime
minister. In addition to that obvious fact, DXJ uses a geographic
screen to exclude companies that derive the bulk of their revenue
in Japan because a weaker yen is good Japan's exporters, not so
much for the importers.
Granted, Abe is less than two weeks removed from victory, but
his pre- and post-election rhetoric about weakening the yen and
getting Japan's inflation rate to two percent has been sharp. That
has buoyed hopes that the Bank of Japan will get in line with Abe's
wishes and finally jolt the Japanese economy higher.
Market Vectors Vietnam ETF (NYSE:
) Due to inflation problems that, until this year, could best be
described as rampant,
the State Bank of Vietnam has not been able to cut
interest rates in more than two years
Vietnam's benchmark interest rate, currently nine percent, has
banks, business owners and market participants desperate for lower
rates. Despite the controversy that has surrounded Vietnamese
financial services firms in 2012, the country's banks are
well-funded and inflation there is expected to be seven percent
this year. If that is the final number, it would be an encouraging
sign because the government's original goal for 2012 was 7.5
Earlier this month, Prime Minister Nguyen Tan Dung told a
Vietnamese press outlet that the country has room to cut rates. If
that does happen, expect a bounce in VNM.
Market Vectors Indonesia Index ETF (NYSE:
) Indonesia, Southeast Asia's largest economy and the fourth most
populous nation in the world, has monetary issues of its own. The
Indonesian Rupiah has faltered against the U.S. dollar this year,
but the country has a widening current-account deficit and a $1.5
billion trade gap as of October,
according to Bloomberg
Those issues have contributed to laggard status for IDX and
Indonesia ETFs this year. Year-to-date, IDX is off slightly, but
even the small loss puts the ETF well behind the stellar gains
posted by the comparable ETFs tracking other Southeast Asian
nations such as the Philippines and Thailand.
Bank Indonesia is widely expected to raise rates at its next
policy meeting. However, the more important issue is the central
bank's ability to keep Indonesian inflation in the 3.5 percent to
5.5 percent area next year. An unexpected rise in inflation there
could prompt aggressive tightening and that could spook investors
from Indonesian equities.
For more on ETFs, click
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.
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