Worries have been building over the Chinese market, thanks to
concerns regarding a number of aspects of the nation's economy
such as the financial sector and the still heavy dependence on
manufacturing to power growth. This has culminated in sluggish
GDP growth rates and speculation that annual GDP increases could
fall below 7%.
These trends have led to poor trading not only for China
, but for copper ETFs as well. After all, China is the largest
consumer of copper in the world, so its economic outlook will
have a huge impact on prices for the red metal (read
China ETFs Tumbling on Fears of Credit Crunch
As a result, copper prices have fallen by nearly 20% on the
year, pushing the metal down alongside many of its other beaten
down peers in the commodity world. And with China still
struggling, there has been little optimism that the industrial
metal could turn it around heading into the end of 2013.
A Glimmer of Hope?
However, some investors could be turning more bullish on the
metal thanks to recent figures out of the nation.
China just released data regarding its exports
for July, and both figures were actually quite strong.
Exports rose 5.1% in July when compared to the year ago time
frame, led by strong export growth to the U.S. (5.3%), and Europe
(2.8%), the two biggest destinations for the country's goods.
Meanwhile, imports were even more surprising, moving higher by
10.9% when compared to the year ago forecast, pushing the trade
surplus to just $17.8 billion (also
Base Metal ETFs Soar on Strong Data
This is especially encouraging because it suggests that there
has been some progress in rebalancing the country's economy,
meaning that a slightly more self-sufficient China could be
around the corner. Additionally, imports of commodities were also
high, suggesting strength is ahead for China, and that the
world's top consumer of copper is hungry for more of the
The news unsurprisingly led to bullish trading conditions in
Chinese ETFs, pushing major funds up by over 1% on the day. The
real strength was seen in the copper ETF market though, as
products in this space added a couple percent and led the way
higher. Below, we highlight two such ETFs which were especially
impacted by this trend, and could be funds to watch if China
continues to rebound:
iPath DJ-UBS Copper TR Sub-Index ETN (
This exchange-traded note looks to follow the Dow Jones-UBS
Copper Subindex Total Return, giving investors exposure to the
return of futures contracts on copper. The benchmark is also a
total return index, so investors also receive a collateralized
investment in T-bills as well (see the full list of
The product charges investors 75 basis points a year, and it
has decent volume and assets under management. This is especially
true when you compare the note to other products in the space,
none of which have attracted much in interest.
The ETN added about 2.9% after the China data came out, though
the product was down about 6.3% in the trailing three month
First Trust ISE Global Copper Index Fund (
For an equity play on copper, investors have CU as an option.
This ETF tracks the ISE Global Copper Index, tracking companies
engaged in some aspect of the copper mining industry, including
mining, refining, or exploration (read
the Guide to Broad Metals and Mining ETFs
The fund doesn't utilize a market cap weighting system for its
holdings, instead seeking to give more weight to firms that are
more exposure to copper production, as represented by
copper-related revenues. Due to this, small and mid caps do make
up a decent chunk of assets, while foreign stocks-specifically
Canada and the UK-make up the majority of the portfolio.
The product charges investors a somewhat high 70 basis points
a year in fees, while it hasn't seen the most in terms of
popularity. In fact, the volume here is rather low, suggesting
that bid ask spreads may be wide in some cases.
CU added about 4.1% following the bullish China news,
hopefully signaling an end to the bear run for this ETF. The
product has been beaten down though, as it has lost nearly 20% in
the past three months, and more than a third of its value since
the beginning of the year, so it may be an interesting play at
these prices if trends continue.
There has been extremely rough trading in the China ETF market
to start 2013 as concerns over debt and growth rates hit shares
in the nation. These worries have also impacted commodities, and
particularly copper, as China is a huge consumer of the red
Recent data from the country though has been rather
encouraging, suggesting that the worst may possibly be over. This
could help copper prices in the near term, and if China continues
to rebound, it may make copper ETFs interesting-but
high volatility-value plays for intrepid investors.
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
FT-ISE GLBL COP (CU): ETF Research Reports
ISHARS-CHINA LC (FXI): ETF Research Reports
IPATH-DJ-A COPR (JJC): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for
the Next 30 Days. Click to get this free report