Name the top-performing global stock market thus far in 2012.
Believe it or not, a guess other than Venezuela would be wrong.
The country that has been ruled by leftist President Hugo Chavez
since early 1999 is home to a stunning stock market rally.
Despite Chavez's penchant for socialist policies, Venezuelan
equities have more than tripled year-to-date. All that despite
the fact that Chavez likes to nationalize industries or seize
assets of foreign companies operating in his country. He has done
so 1,000 times since taking office,
according to Bloomberg
To foreign investors, Venezuela is arguably known for two
things: High risk of asset seizure and oil. The country, an OPEC
member, is Latin America's largest producer of crude. Given
Venezuela's status as one of the world's top oil producers and
the fact that plenty of foreign oil majors operate there, some
might think accessing Venezuelan equities via an ETF is possible.
After all, even
politically volatile Argentina
has an ETF, that being the Global X FTSE Argentina 20 ETF (NYSE:
as ETFdb's country exposure tool
highlights, there are no ETFs currently offering equity exposure
to Venezuela. That means investors must turn to bond funds to
dance with Chavez.
There is risk with Venezuelan bonds, too. Barclay's estimates
that Venezuela's budget deficit could hit nearly a fifth of the
its economic output in 2012, Bloomberg reported. When Chavez won
re-election last week, Venezuelan sovereign debt fell by the most
in four years.
Analysts are mixed in their assessments of Venezuelan debt.
JPMorgan upped its rating on Venezuelan debt to Overweight just
days after Chavez was re-elected. HSBC said any sell-off in
Venezuelan bonds could be
"short and limited."
On the other hand, the country is home to rampant inflation
(28 percent this year) and Moody's Investors Service says the
fiscal deficit could reach 7.7 percent
GDP this year
For those willing to take the risk on continued ebullience
toward Venezuelan debt and equities, there are a few ETFs with
which to accommodate that desire.
Arrow Dow Jones Global Yield ETF (NYSE:
The Arrow Dow Jones Global Yield ETF debuted in May and has
managed to rake in $21.4 million in assets under management in
that time. GYLD, which has a 30-day SEC yield of 6.11 percent, is
a mix of alternative assets, global stocks, international REITs
and international corporate and sovereign debt.
No single holding receives a weight of more than 0.68 percent
in the ETF and it is worth noting that at the country level, the
U.S. represents 41.3 percent of the ETF's weight. The allocation
is 3.3 percent
Market Vectors LatAm Aggregate Bond ETF (NYSE:
BONO, the ETF not the singer, is a curious case. Up 7.7
percent year-to-date and offering exposure to countries
primed for higher credit ratings
, the fund has just $7.7 million in AUM.
Investors are missing out on a lineup that is two-thirds
investment-grade, a 5.34 percent 30-day SEC yield and a monthly
dividend. BONO features an almost 11 percent weight to Venezuela
and a dollar-denominated Venezuelan debt issue is the ETF's
Market Vectors Emerging Markets High Yield Bond ETF
The newly minted Market Vectors Emerging Markets High Yield
Bond ETF is off to a decent start with almost $21 million in AUM
since its May debut. A decent AUM total and a 4.4 percent gain
since debut indicate investors do have a taste for
non-U.S. high-yield debt. HYEM is not shy about
its Venezuelan exposure. Venezuela is the second-largest country
exposure in HYEM at nearly 8.3 percent. A dollar-denominated
B+-rated issue from Petroleos de Venezuela, the country's
state-run oil firm, is HYEM's fourth-largest holding.
Interestingly, Venezuelan issues are more prominent among the
top-10 of HYEM's
than the ETF itself
Other ETFs to consider for Venezuelan debt exposure:
WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ:
) with a weight of 2.46 percent. The iShares J.P. Morgan USD
Emerging Markets Bond Fund (NYSE:
) features a 4.7 percent weight to Venezuela while the SPDR BofA
Merrill Lynch Emerging Markets Corporate Bond ETF (NYSE:
) features two Venezuelan issues among its top-10 holdings.
For more on Latin American bond ETFs, click
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