With broad economic fears declining and the fiscal cliff
averted, 2013 began on a positive note, producing investor
confidence in the markets. Many opted for risky assets in order
to obtain higher returns. While equities have experienced a heavy
inflow of funds ever since 2000, some
even rallied to break the resistance level and set new highs.
The first month of the year was pretty impressive with quite a
few ETFs experiencing heavy ETF inflows and posting double-digit
gains. Moreover, better economic data fuelled the positive
sentiment in the market (
Best ETFs to Start 2013
Extending the strong rally experienced in January, the month
of February also started on a positive note with ETFs gaining
momentum. However, it seems that some level of volatility has
emerged in the market in the last few days of the month.
VIX, the indicator of market direction, has been in record low
territory for the last several months and the markets have
continued a spectacular run higher. But in the Monday trading
session it went for its much awaited rally, signalling that a
pullback might be possible in the S&P 500 (
Which Volatility Hedged ETF Should You
In hindsight, February evoked mixed sentiments, starting
strongly but finishing on a choppy note. In such a scenario, we
would like to highlight a few ETFs which have been star
performers of the month and some others that have turned out to
be major disappointments.
Among all the ETFs which have lured investors this month, the
Market Vectors Indonesia Small-Cap ETF (
particularly stands out, recording an impressive year-to-date
gain of 22%. In February alone it earned a gain of 10.2%. After a
dismal performance in 2012, the recovery in the New Year has been
As the name suggests, the recently launched IDXJ offers a
targeted exposure to the small cap segment of the Indonesian
market thereby providing a better opportunity to tap domestic
Van Eck Launches Indonesia Small Cap ETF
IDXJ manages an asset base of $4.4 million and provides
exposure to 25 small cap securities of Indonesia. The fund
charges an expense ratio of 61 basis points annually.
The ETF appears to be concentrated in the top ten
holdings as it allocates a hefty 61.1% of asset base to them.
Among sector allocations, Financials dominates the list with a
40.9% share while Industrials and Consumer Staples get the next
two positions sharing 28.1% and 12.7% of the asset base,
The Indonesian economy, the biggest in Southeast Asia, appears
to be poised for good growth in 2013 attributable to healthy
domestic consumption, good investment climate and more
infrastructure development. Low inflation and interest rates
should also support economic growth (
Can Indonesia ETFs Rebound in 2013?
The biggest drag on the economy in 2012 was declining exports
to weaker developed markets. However, in 2013, the growth of the
economy is expected to be supported by both strong domestic
consumption and some recovery in export demand. Political
uncertainty related to elections still remains a matter of
Another ETF counted among the best performing ETFs of February
MSCI Philippines Investable Market Index Fund (
The performance of the ETF has been quite remarkable. The fund
has gained an impressive 15.7% in the year-to-date period while
in February alone it recorded a gain of 7.41%.
Currently, the product has just over 42 securities in its
basket. The maximum sector exposure is to Financials (42.6%),
Industrials (24.1%), and Utilities (9.9%).
Investors should note that the fund is concentrated in the top
10 holdings with more than 55% of investment. Among individual
holdings, SM Investments Corp, Ayala Land and SM Prime Holdings
take the top three positions with 10.3%, 8.28% and 6.19%,
respectively, of EPHE's assets. The fund charges an expense ratio
of 60 basis points (
Top Ranked Philippines ETF in Focus: EPHE
The Philippines has been one of the very strong performers
among the emerging markets and still appears to be well poised
for further growth. The government expects to sustain the growth
momentum in 2013 through public-private partnerships for
For 2013, the improvement in the growth rate could also be
accompanied by a low level of inflation. Lower inflation will
allow interest rates to remain low thereby leading to a positive
Further, the manufacturing and construction sector of the
economy appears to be well poised for growth this year. The
economy also seems to benefit from tourism and the strength in
its consumer and service sector.
While EPHE and IDXJ rewarded investors with handful of
Global X Gold Explorers ETF (
iShares MSCI Italy Capped ETF (
turned out to be top losers of the month.
The gold mining industry has been underperforming for quite
some time. Rising production cost, pressured margins, over-budget
projects and money-losing multibillion-dollar takeovers led to
the dreadful situation in the industry (
Time to Buy Junior Gold Mining ETFs?
For many years, the companies in the industry are running low
on returns mainly caused by dilution that has resulted from
issuance of new equity to finance acquisitions and reinvestment
in marginal projects.
In such a scenario, ETFs tracking the industry are the least
preferred choices among investor incurring double-digit losses.
Proving this point, GLDX turned out to be the worst performing
ETF in the month.
has recorded a loss of 22.5% in February while its year-to-date
loss stands at 28.8%. The fund provides exposure to 23 companies
in which it invests an asset base of $5.5 million.
The fund has around 56% of the asset base invested in the top
ten holdings. Among individual holdings, Torex Gold Resources,
Continental Gold and NewStrike Capital occupy the top three
positions. The ETF charges a fee of 65 basis points annually.
Another ETF which disappointed investors with its weak
performance in the month was
. The deadlocked elections in Italy led to a sharp fall in price
of the ETF. EWI plunged 12.4% in February (
Italy ETF Plunges on Election Chaos
The fund with more than 1 million shares in volume manages an
asset base of $549 million. EWI provides exposure to a small
basket of 26 stocks and charges a fee of 51 basis points
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ISHARS-MS PH IM (EPHE): ETF Research Reports
ISHARS-ITALY (EWI): ETF Research Reports
GLBL-X GOLD EXP (GLDX): ETF Research Reports
MKT VEC-INDO SC (IDXJ): ETF Research Reports
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