For Immediate Release
Chicago, IL - May 10, 2016 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include SPDR Gold Trust ETF ( GLD ), iPath S&P 500 VIX Short-Term Futures ETN ( VXX ), iShares 20+ Year Treasury Bond ETF ( TLT ) and ProShares Short FTSE China 50 ( YXI ).
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Here are highlights from Monday's Analyst Blog:
Profit from These ETFs If China Turmoil Continues
China has been hitting headlines and is playing foul on the global stock market since the start of this year. After showing its ugly side in the initial weeks of 2016, China, no doubt, showed some signs of stabilization. However, this trend seems to be reversing again with the latest round of downbeat data and negative news flows (read: Investors Returning to China ETFs ).
In particular, weaker-than-expected April trade data and sluggish manufacturing data washed away hopes of recovery in the world's second largest economy. Exports fell 1.8% year over year in April after jumping 11.5% in March while imports dropped for the 18th consecutive month, slumping 10.9% year over year. Also, China Caixin manufacturing PMI fell for the 14th consecutive months to 49.4 from 49.7 in March and was below the Reuters' forecast of 49.9.
Plus, an article in People's Daily , the official paper of the ruling Communist party, on May 9 stroked fears of China suffering from a financial crisis if the government relies too much on debt-fuel This is because excessive credit growth or high leverage could intensify risks, leading to negative economic growth and even wiping out of consumer savings. The article says: China's economic trend in the coming years will be "L-shaped" rather than "U-shaped", and definitely not "V-shaped" due to weak demand and overcapacity.
Notably, China's debt ballooned to a record 237% of GDP in the first quarter from 148% of GDP at the end of 2007 and was much above the other emerging market counterparts. Moreover, China has lost its momentum as the economy grew just 6.7% annually in the first quarter, representing the slowest pace of quarterly growth since the financial crisis in 2009. Though this was in line with market expectation, it is slightly below 6.8% recorded in the fourth quarter of 2015 (read: Is It Finally Time for China ETFs? ).
The persistent sluggishness in China will lead to a global slowdown, as the economy is becoming a dominant player in driving global growth. As per the Conference Board , China's contribution to global GDP will surpass that of the U.S. by 2018. In addition, the country will contribute 30% to global economic growth by 2020 according to the IMF.
In fact, the stock market across the globe was hit hard when China turmoil crept up. If the matter turns worse in China, then it could lead to another panic sell-off in the broad markets like the one we saw in early 2016. As such, investors looking to stash their cash in this difficult time could consider the following ETFs that offer stability or even profit if the turmoil persists in the weeks ahead or more data disappoints (read: Global Growth Worries Loom: ETFs to Play ).
SPDR Gold Trust ETF ( GLD )
Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion like GLD could be an interesting pick to play in the market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $34.4 billion and heavy volume of nearly 9.5 million shares a day. It charges 40 bps in fees per year from investors. The fund has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook (read: Gold ETF Hits New 52-Week High ).
iPath S&P 500 VIX Short-Term Futures ETN ( VXX )
While volatility products like VXX have been terrible performers over the medium and long terms due to a contangoed market and a steep roll cost, these tend to rise when the markets are sliding or investor panic starts to set in. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility of the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second month VIX futures contracts. The note has amassed nearly $1.5 billion in AUM and charges 89 bps in fees per year. Volume is extremely solid as it exchanges nearly 73 million shares per day (read: Will Volatility ETFs Rule in May? ).
iShares 20+ Year Treasury Bond ETF ( TLT )
Given the instability in China and the resultant global slowdown concerns, demand for American bonds will increase pushing the yields lower. In particular, the products tracking the long end of the yield curve often act as safe haven, and TLT is the most popular and liquid option with AUM of $8.1 billion and average daily volume of around 8.5 million shares. It tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index, charging 15 bps in fees per year from investors. Holding 31 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.58 years and effective duration of 17.74 years. The product has a Zacks ETF Rank of 2 or 'Buy' Rating with High risk outlook.
ProShares Short FTSE China 50 ( YXI )
Investors looking for an outright bet against China, then an inverse ETF could be the way to go. A fund like YXI that offers to pay the opposite of the return of a Chinese benchmark will likely make profits in this uncertain time. This ETF delivers the inverse return of the FTSE China 50 Index, which offers exposure to the 50 largest and most-liquid Chinese stocks listed on the Hong Kong Stock Exchange. The fund has accumulated $12.3 million in its asset base and trades in light volume of 14,000 shares a day on average. Expense ratio comes in at 0.95% (read: Can the Year of Monkey Bring Fortune to China ETFs? ).
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