3 ETFs to Play on Ukraine Turmoil - ETF News And Commentary
The global stock markets are seeing choppy trading thanks to the
tension between Ukraine and Russia. All eyes are currently on
Europe and the whole world is watching the impact of any
development in the worst East-West standoff since the Cold War.
Ukraine Crisis in Focus
The tensions in Ukraine have flared up ahead of the referendum to be held on March 16 that will decide the fate of Ukraine's Crimean peninsula region. The referendum will tell whether the debated peninsula will move to Russia or will stay with Ukraine. The lawmakers may vote for independence and might agree to its becoming a Russia state (read: How Russia ETFs Have Performed in the Ukraine Crisis ).
The G7 group of nations - the U.K., Canada, France, Germany, Italy, Japan and the U.S. - along with EU leaders warned Russia over Crimea annexation and asked Russia to stop the referendum from taking place. The G7 views the referendum as illegal and a clear violation of international law.
Further, if Russia does not cease its effort to annex Crimea or pull Russian troops out of the region then Moscow will be penalized and hit by tough sanctions such as asset freezes and travel bans. However, Russia has not yet abandoned its ambitions in Crimea and has tightened its control on the peninsula.
The Ukraine-Russia dispute aggravated when the Ukrainian president Viktor Yanukovych was ousted in late February and Russian President Vladimir Putin started doubting that the new Ukrainian government might cancel the Russian Navy's lease. As a result, Putin wants Crimea to be under Russian roof. This is especially true as the region is home to Russia's Black Sea fleet and its main port is on lease to Russia.
The geopolitical tension might heighten further in the near term if Russia does not back out or if the referendum is presented this weekend. Given this turbulence, investors are dumping riskier securities and are turning to any safe haven play (read: 3 Energy ETFs to Buy on the Ukraine Crisis ).
ETFs to Consider
For those investors, we have highlighted three ETFs that will likely benefit from the crisis and would be in focus in the weeks ahead.
SPDR Gold Trust ETF ( GLD )
This is the ultra-popular gold ETF with AUM of over $35.1 billion and heavy volume of more than 8.2 million shares a day. It charges 40 bps in fees per year from investors (read: Palladium ETF Surging on Tensions in Ukraine ).
The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Each share represents about 1/10th of an ounce of gold at current prices. The ETF added about 6% over the past one month and has a Zacks ETF Rank of 3 or 'Hold' rating.
iShares 20+ Year Treasury Bond ETF ( TLT )
This fund provides exposure to the long-term Treasury bonds by tracking the Barclays Capital U.S. 20+ Year Treasury Bond Index. It is one of the most popular and liquid ETFs in the bond space having amassed over $2.8 billion in its asset base and more than 7.7 million shares in average daily volume. Expense ratio came in at 0.15%.
Holdings 23 securities in its basket, the fund focuses on the top credit rating bonds (AA+ and higher). The average maturity comes in 27.28 years and the effective duration is 16.46 years. The product gained just 1.32% in the past one month and has a Zacks ETF Rank of 3 or 'Hold' rating (read: 3 Bond ETFs Surging as Interest Rates Tumble ).
CurrencyShares Japanese Yen Trust ( FXY )
This product appears a great way to play a future rise in the yen relative to the U.S. dollar. It tracks the movement of the yen relative to the U.S. dollar, net of the Trust expenses, which are expected to be paid from the interest earned on the deposited Japanese yen (see: more Currency ETFs here ).
The fund charges 40 bps a year in fees. Additionally, the ETF sees a good volume of roughly 257,000 shares per day and has accumulated $189.1 million in its asset base. The ETF lost 0.24% in the trailing one-month period and has a Zacks ETF Rank of 4 or 'Sell' rating. While long-term trend is negative due to Abenomics, the short term looks promising as investors are currently riding high on Japanese yen due to uncertainty in Ukraine.
It seems that the political unrest in Ukraine might turn into a cold war if Russia does not stay away from military escalation. This would continue to roil global markets, making the above-mentioned ETFs solid ways to play the trend.
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