Power Shift Seems to Agree With Russia ETF

On May 7, Vladimir Putin stepped down and Russia's new president became Dmitry Medvedev - is it any coincidence that in one day, the Russia exchange traded fund (ETF) rose 4.4%?

Market Vectors Russia (RSX) seems to be a beneficiary of the surge in energy prices in particular, as 43.1% of the fund is allocated in the sector. It's up 6.4% year-to-date.

Foreign investors, attracted by the record-high oil prices, are turning a blind eye to the country's expulsion of U.S. diplomats and threats of a war with Georgia, reports Peter Apps for Reuters. The expulsions were ordered on April 28 after the United States expelled three diplomats earlier in April. The back-and-forth is bringing back Cold War memories.

Some investors might be deterred by Russia's issues, especially when compared with other emerging markets such as Brazil, which has the growth without the political risks. And those investors who are concerned with the oil and energy sector in Russia are focusing on other sectors such as construction and retail.

An ETF is a good way to get exposure to several sectors - the diversification means you could potentially benefit from any growth, while avoiding too much risk if it doesn't pan out.

Exposure to Russia can also be had through the SPDR S&P Emerging Europe (GUR), which also contains exposure to Poland, Turkey, the Czech Republic and Hungary. Year-to-date, it's down 5.2%.

A closed-end fund (CEF) contains Russia exposure, too: the Central Europe and Russia Fund (CEE), which is down 5.1% year-to-date. It holds 27.7% of the country.

For full disclosure, some of Tom Lydon's clients own shares of RSX.

Turkey and Its ETF May Need More Time In The Oven

Are you brave enough to grow your nest eggs with a Turkey exchange traded fund (ETF)? If you want to invest some of your time and money into the Turkish stock market, it is best to do so with an appetite for risk, as this country may need more time in the oven.

Vito  J. Racanelli for Barron's suggests that after a 25% drop from October highs, the Turkish stock market is the cheapest it's been in a while. After outstanding performances since 2002, this emerging market has been one of the worst performers this year.

Investors have been deterred by two things in particular: a worsening economic picture and rising interest rates. Gross domestic product (GDP) was once high at 7%, but is predicted this year to slow to between 4% and 5%.

The current government is market friendly and fiscally disciplined, but the survival of the president's party is in question. The Constitutional Court could sweep it off its legs and leave the economy and the country's political stability in doubt.

There are two ways to get exposure in Turkey:

• Turkish Investment Fund (TKF): A closed-end fund, which is down 14.8% year-to-date.

• iShares MSCI Turkey Investable Market Index (TUR): A fund that launched on April 1, it's up 9.3% since then.

BRIC ETFs Were Anything But In April

BRIC exchange traded funds (ETFs) showed themselves to be solid in April. Investor interest and enthusiasm for the funds has peaked over the past several years, with outstanding sector-leading performances in 2007.

Richard Widows for The Street researched the BRIC ETFs for the month of April, some of which posted impressive performance numbers.

SPDR S&P China (GXC) was up 17.97% in April, and was the top performer for the month. iShares FTSE/Xinhua China 25 Index (FXI) advanced 17.5% with a net $6 billion in assets.

Brazil fared well with a pair of ETFs: iShares MSCI Brazil Index (EWZ)  up 17.3% and HOLDRs TeleBras (TBH) up 14.2% in April.

First Trust ISE Chindia (FNI) was up 16.6%, as a blend of China and India, and Claymore/BNY BRIC (EEB) was up 11.1%. An honorable mention was given to iPath MSCI India Index (INP), as the ETN gives a hard-to-access passage to India. The fund rose 7.1% in April.

There's still more BRIC exposure to be had, though, both in single-country and broad-based form.

• Market Vectors Russia (RSX), up 3% in April
• SPDR S&P BRIC 40 (BIK), up 9.7% in April
• iShares MSCI BRIC Index (BKF), up 9.8% in April

For full disclosure, Tom Lydon's clients own shares of INP.

Steel ETF Is Getting Hot to the Touch

Describing something as "steely" is usually a synonym for "coldness," but not when it comes to the steel exchange traded fund (ETF).

Market Vectors Steel (SLX), which launched in October 2006, is at record highs thanks primarily to booming global demand for the metal. Year-to-date, it's up 19.6%.

In the Middle East, the steel industry is said to be undergoing a transformation. It currently accounts for only 2% of the global steel trade, AME Info reports. In 2006, the region produced 21.1 million tons of raw steel and consumed 41.6 million tons of finished goods. Those numbers are respectively forecast to rise to 35 million and 60 million tons by 2010.

In China, the number of steel factories has doubled in the last few years. Even on our home turf, steel demand is up about 30% ahead of its supply.

Think You're Diversified Enough With ETFs?

How diversified is your exchange traded fund (ETF) portfolio? No matter how well you think you have your bases covered, every portfolio is vulnerable to something, cautions Roger Nusbaum for The Street.

Many investors who invest in broad-based ETFs or actively managed mutual funds end up too heavy in the financials. Individual stocks and sector funds also tend to have the same problems. An example of the correlation between two broad-based funds can be seen in two market segments that tout increased growth and unstoppable demand.

iShares S&P Global Materials Index Fund (MXI) and the BLDRs Emerging Market 50 ADR Index (ADRE) have a tight correlation, especially in times of stressful corrections. The increased demand for natural resources in places like China and India have also triggered demand from countries with the natural resources like Brazil and Chile, according to Nusbaum.

The infrastructure buildup is still in its infancy, and needs more time and dollars to take off. Right now China is off its peak 40%, so think about what this could do for related sectors, ETFs and countries. Think about the China decline, and how easy emerging markets, and materials could go down, too. Also, remind yourself of the true total exposure to these sectors and how a decline would affect your portfolio.

The time to come up with your exit strategy is now. It's wise to know your plan and stick to it, regardless of emotion. When a fund drops below its 200-day moving average or 8% off its high, sell it. Once you begin rationalizing your movies or hoping for a turnaround is when you get into trouble.

Mexico ETF Goes Great With Chips and Salsa

What better way to celebrate Cinco de Mayo than with a heaping bowl of guacamole, a round or three of margaritas and a Mexico exchange traded fund (ETF)?

The timing is good, too: the iShares MSCI Mexico (EWW) has been gathering steam lately, going up 11.3% since March 10. Year-to-date, it's up 5.8%.

In the last decade, Mexico has delivered annualized returns of 16.99%, handily outpacing other single-country ETFs. The fund is heavily concentrated in the wireless sector, with 25.1% of the fund given to America Movil (AMX), the largest cell phone operator in Latin America.

Today, America Movil stock rose along with some mining companies, Reuters reports. Shares of Grupo Mexico, one of the world's largest producers of copper, shot up in trading today, as well. Grupo Mexico is 5% of EWW.

Mexico has also been given a lift via rising oil prices as the world's sixth-largest crude exporter. Futures rose past a record $120 a barrel today, says John Wilen for the Associated Press. However, over the weekend gas prices fell more than a cent. Don't spend those big savings all in one place.

A View of ETFs In An Obama White House

If Barack Obama were to win the election for presidency this November, what would happen to the investment world, particularly exchange traded fund (ETF) investors?

Awhile back, we talked about funds that could benefit in a McCain win, as well as an overall Democratic win.

Jonathon Bernstein for ETFZone believes that the most immediate and powerful impact of an Obama win would be the within the area of foreign policy. He could help to ease tensions with the Middle East and Venezuela, which would in turn calm oil prices and shift the overall momentum of the markets. Currently, oil is at all-time highs, so just the thought of Obama in the White House would send oil lower in funds such as Unites States Oil (USO).

The dollar might end up in a stronger state, as a major reason the dollar fell against the euro is oil imports. If the United States were to import less oil, or or pay less for the oil it does import, we might see an improved trade deficit, thus upping the demand for U.S. dollars. CurrencyShares Euro Trust (FXE) would reflect the dollar-euro ratio.

Obama says he would keep tax cuts for the middle class, and doesn't support Bush's tax cuts for the wealthy. Both those and his dividend tax cut expire in 2010. Dividend-focused ETFs such as iShares Dow Jones Select Dividend Index (DVY) or the State Street SPDR Dividend (SDY) could be vulnerable if the tax cuts aren't renewed.

Obama also supports working to put an end to global warming and a push to reduce U.S. carbon emissions by 80% by 2050. He also supports ending the ban on stem cell research.  Both iShares Nasdaq Biotechnology (IBB) and the WildersharesClean Energy (PBW) could experience positive movement if these issues are addressed.

How to Invest in Single-Country ETFs

Exchange traded funds (ETFs) that track a single country have have been a boon to many long-term investors. They allow investors to reduce their exposure to specific regional disruptions, such as the recent credit crunch, and they up the exposure available to countries that are profiting more than the United States or other distressed nations.

Global growth has been outpacing that of the United States' for some time now. Evidence of this can be seen just by looking at the performance of the S&P 500: year-to-date, it's down 5%. Its five-year average return is 10.6%, and the ten-year average is 3.9%.

Investors can't be blamed for considering looking abroad for places to put their money. Single-country funds offer more flexibility than mainstream equities, says Alan Farley for The Street.

Overnight gaps that can occur in single-country ETFs can subject them to volatility.

iShares MSCI Mexico (EWW) is an example, as it fell nearly 3% on April 25 because of weak earnings from America Movil (AMX). However, over the past decade, EWW has benefited from Mexico's steady growth in the last decade. Year-to-date, the fund is up 3.6%.

Other ETFs with a strong year-to-date performance include iShares MSCI Brazil (EWZ), which is up 12% and has an annualized return of 55.4% over the last five years;  iShares MSCI Taiwan Index (EWT), up 10.2% so far this year, with an annualized return of 18.6% over the last five years.

Brazil was upgraded yesterday by Standard & Poor's to "investment grade."

These uptrends over time with single-country ETFs are all well and good (hindsight is 20/20, right?), but what if you had bought Brazil in November and sold it in January? You would have been down 50%.

But each single country needs to be evaluated on its own merits. Not all of them are going to go up. When it comes to these funds, educate yourself and monitor the trends closely. Have your sell points set for each, letting it go when it either drops below its 200-day moving average or 8% off its high.

If you stick to the plan, hopefully you will achieve your goal of doing well on the uptrends while avoiding the volatility that occurs from time to time.

Does The China ETF Rally Signal Things To Come?

So far in 2008, it seemed as though China and its related exchange traded funds (ETFs) were yesterday's news.

After all, the iShares FTSE Xinhua/China 25 Index (FXI) is down 7% this year, while the SPDR S&P China (GXC) is down 9.6%. 

But with a recent burst of activity that began last week, many investors are wondering if China's recent corporate gains are going to start growing again. Since April 21, FXI is up 6.3%, while GXC is up 7.2%.

Since Dec. 31, the Shanghai index has corrected 45%, says Joanne Von Alroth for Investor's Business Daily.

China's economy is enjoying a multi-year boom with huge economic growth. Some thought the good times would continue this year as the country plays host to the Beijing Summer Olympics.

But political unrest over China's actions in Tibet, inflation, bad weather and China's poor environmental record threw the ETFs into reverse.

Chinese government officials refuse to accept a slowdown for long. Officials cut the stamp tax rate - tax on the purchase or sale of stocks - from 0.3% to 0.1%. Institutional investors buying or selling 100,000 or more shares are now required to do it privately to reduce volume moves.

These moves kicked off the rally that has lasted into this week. Whether it will stick is open to debate, but if China begins to head lower, have your exit strategy in place.

For full disclosure, Tom Lydon's clients own shares of FXI.

Exxon Earnings Put the Brakes on Energy ETFs

Some energy exchange traded funds (ETFs) are down more than 4% in midday trading after Exxon Mobil (XOM) reported a first-quarter profit jump that was less than what Wall Street was expecting.

You can't blame Wall Street for expecting more, considering the price of a barrel of oil these days. Even though Exxon's 17% profit jump to $10.9 billion was the second largest U.S. quarterly profit ever, it still wasn't enough.

Analysts were expecting $2.13 per share, but instead got $2.03 a share, reports John Porretto for the Associated Press. Exxon posted the largest quarterly profit in history for a U.S. company at the end of 2007.

Exxon's shares were down nearly 5% midday, weighing down some of the energy ETFs that count the company as a major component:

• iShares Dow Jones US Energy (IYE): Exxon is 23.1%; up 4.4% year-to-date
• Energy Select Sector SPDR (XLE): Exxon is 18.5%; up 3.3% year-to-date
• iShares S&P Global Energy (IXC): Exxon is 15.8%; up 2.9% year-to-date

Also, if you were thinking of moving out of the country in order to escape those high gas prices - not so fast. Of 155 countries surveyed, it turns out the United States is the 45th cheapest, says Steve Hargreaves for CNN Money.

Next time you drive by the pump and sob at $4 gas, think about how people in other countries must feel: in Europe, the average is more than $8 a gallon; in Aruba, it's $12.03 and in Sierra Leone it's $18.42.

If you're really itching to move, consider Venezuela, where it's 12 cents a gallon. Or Saudi Arabia at 45 cents.

But the numbers don't take some things into account: the falling value of the dollar, the differing salaries in countries and so on.

In Europe, the trade-off for the gas prices is cheaper health care and higher education, which is paid for partly through gas taxes. Europe also sports a better public transportation system.

Brazil, Latin America ETFs Soar After Investment Upgrade

Brazil's exchange traded fund (ETF) got a big boost after Standard & Poor's rated the country to "investment grade."

The country's continually growing economy and debt reduction are cited as two reasons for the upgrade, reports Rob Wherry for Smart Money.

Brazil once had a volatile economy, but is now enjoying some newfound stability, says the Associated Press. Experts are predicting that the country's typical boom and bust economic cycles are a thing of the past.

The upgrade was hard-earned. In the 1980s, the country defaulted on its debt and declared a moratorium on payments. Now it's booming thanks to exports such as beef, iron ore and soy. Foreign investment is on the rise, companies are making record profits and consumers are taking out loans to purchase cars and homes.

S&P Credit Analyst Lisa Schineller says Brazil appears to be on track for sustained economic growth between 4% and 4.5% this year.

iShares MSCI Brazil (EWZ) and iShares S&P Latin America 40 (ILF) rode the wave, gaining 7.2% and 4.4% yesterday, respectively.

For full disclosure, some of Tom Lydon's clients own shares of ILF.

BRIC ETFs Have Many Access Points for Investors

A reader wrote in recently wanting to know more about BRIC and the related exchange traded funds (ETFs). We're here to help!

BRIC stands for four of the fastest-growing emerging markets out here: Brazil, Russia, India and China. In 2007, these countries delivered some of the biggest returns of any ETFs or exchange traded notes (ETNs) around. So far for 2008, BRIC ETFs and some of the single country funds have been fairly quiet.

But make no mistake: these countries are still growing, and could have plenty to offer down the line.

Mexico and Its ETF Has One Caliente Decade

Nine out of the top ten exchange traded funds (ETFs) with high yearly returns actually tracked overseas markets, with one of the hottest markets and funds just south of the border. That's according to Lipper data.

iShares MSCI Mexico (EWW) gained an annualized 16.99% through April 17, compared to the S&P 500 which returned 3.88% over the same time period.

Jesse Emspak for Investors Business Daily reports that the fund tracks the Bolsa Mexicana, the country's stock exchange. EWW is concentrated, with 25% tracking America Movil (AMX). The company is the largest wireless provider in Latin America, and serves 147 million customers in 16 different countries.

Like so many Latin economies, Mexico has had a steady, modest growth in the past 10 years.

The country is exporting more to Europe and Asia as trade ties have solidified and the peso has fallen alongside the dollar.

ETFs Might Benefit From Global Water Shortage

A water shortage has wide implications that hurts many while benefiting water-focused exchange traded funds (ETFs) in the long run.

In Yemen, Mohammed Nasser has had to change his way of life, abandoning traditional customs of hosting passer-by or politicians, now unable to supply essentials for his own family because of the water shortage affecting agriculture. Almigdad Mojalli for Yemen Times reports that 10 years ago, water was plentiful. Now, of the 20 wells that used to supply the village's water, only two are functioning.

A bit closer to home, Tim Teichgraeber for decanter reports that April frosts have caused widespread damage to vines in Northern California, and now a water shortage has hampered sprinkler usage in an effort to salvage them. Some of the more vulnerable vineyards are those that lack overhead sprinklers which protect the vines when temperatures go below freezing. Some sprinklers have used up the entire water supply for the season, too.

Around the world, in New South Wales, Australia, the drought is also taking a significant toll. The dams that supply water for irrigation to the large crops are dried up, causing many farmers to go without crops, and therefore, without income. Australia's failed rice crop will also affect the cereal and grain crop, reports Asa Wahlquist for The Australian.

The rice shortage has led to rationing in the United States and riots in Haiti and Egypt.

However, water is not quite like the other commodities, and has its own special set of circumstances. It's not priced on a global market, it's heavy and transporting it costs more than it's worth.

Water ETFs currently available are:

• PowerShares Water Resources (PHO), down 4.1% year-to-date
• Powershares Global Water (PIO), down 10% year-to-date
• Claymore S&P Global Water (CGW), down 5.6% year-to-date
• First Trust ISE Water (FIW), down 1.4% year-to-date

What Do Expense Ratios Have To Do With It?

There are big discrepancies between assets and revenues, as analysts point out, but do expense ratios really matter to investors when it comest to investing with exchange traded funds (ETFs)?

Matthew Hougan for Index Universe shows evidence that investors seem to overlook expenses:

• iShares MSCI Emerging Markets (EEM) has an expense ratio of 0.74%. It currently has $24 billion in assets. Vanguard Emerging Markets (VWO), which is a competing fund, has a 0.30% expense ratio with a strong performance record, but has a smaller $6 billion in assets. 
• Another case in point: Mid Cap SPDR (MDY) tracks the S&P 400 and charges 0.25% in expenses, with $8.2 billion in assets. iShares S&P 400 MidCap (IJH) charges 0.20%, tracks the same index and has $4.4 billion in assets.

This may be a case where the ETFs with the greatest assets in each category are also the first ETFs to hit the market, since this is the case in these examples.

Another clue Hougan cites as evidence that investors might not care much about expense ratios is that, with some exceptions, fund companies generally don't market toward it. Some ETFs are launching today with fees of 0.70% or more.

Do investors know, but just not care? Perhaps. Expense ratios are just one factor in the equation. Spreads, in some cases, can outweigh any advantage a low expense ratio might offer.

It doesn't seem a lack of understanding as far as ETFs go is the problem. A survey we summarized yesterday reported that of the investors who participated, 16% use ETFs. A large portion of these ETF users, 87%, said they understood how fees impacted their returns.  This was quite different compared to all the survey respondents; 88% felt fees for the fund industry overall were unclear.

Which single ETF feature is most important to you among the following? Expense ratio, brand name, past performance or assets under management? Feel free to answer in the comments!

Rationing Leads to Hoarding of Rice and Possibly ETFs, Too

The commodities craze spread to exchange traded funds (ETFs) awhile ago - now it's reached Sam's Club.

A worldwide rice shortage has led the warehouse unit of Wal-Mart (WMT) to start rationing some types of it, reports Cotten Timberlake for Bloomberg. Where allowed by law, customers are going to be restricted to four bags a visit.

Shrinking supply and rising prices have led to hoarding. Rice is a food staple for half the world, including in China, Vietnam, India and Egypt, countries that have also started restricting sales. Thailand is also considering restricting shipments.

Some of Costco's (COST) stores are putting limits on sales of flour, in addition to those of rice.

The good news is that both stores have extensive distribution systems, enabling them to redistribute supplies.

The rice shortage is just the latest in a long line of commodities that have become more scarce and expensive recently. Rice futures have risen 26% this month. Wheat, corn and soybeans are also at record prices, which has led to riots in Haiti and Egypt.

A spokesman for the USA Rice Federation says the rice shortage should ease up with the June harvest, and may be resolved by the end of 2009.

But if you were mulling a low-carb diet, now might be the time.

Agriculture ETFs are becoming a popular way to hedge those rising prices. Some of them include:

• MLCX Grains Index ETN (GRU): The fund has 46.7% wheat, 35.4% corn, 10.1% soy meal and 7.9% soybeans.  
• Market Vectors Global Agribusiness (MOO): Tracks an index of global companies primarily engaged in agriculture.
• PowerShares DB Agriculture (DBA): Tracks corn, wheat, soybean and sugar futures.
• iPath Dow Jones Agriculture (JJA): Composed of seven futures contracts, including wheat, cotton, soybean oil, coffee and sugar.

Deutsche Bank also issued a line of long/short agriculture exchange traded notes (ETNs) last week:

• DB Agriculture Double Short (AGA)
• DB Agriculture Double Long (DAG)
• DB Agriculture Short (ADZ)
• DB Agriculture Long (AGF)

Oil Prices May Get Worse; Steel and Natural Gas ETFs Are Keeping Pace

The price of oil has slipped some over the last few days, but it's projected to soar even higher - what will it mean for its exchange traded funds (ETFs)?

The reports on fuel got more dismal this morning, as many wonder just how much worse it's going to get. According to an energy report from the Canadian Imperial Bank of Commerce today, oil could hit $225 a barrel by 2012.

Cars are blamed for the continually rising prices: 90% of the demand growth in the last few years has gone to transportation. Car sales globally soared last year, growing 60% in Russia, 30% in Brazil, 20% in China. Sales were flat in Europe and dropped in the United States.

Meanwhile, the oil ETF isn't the only one performing. Steel and natural gas are nothing to turn up one's nose at, either. Gary Gordon for ETF Expert reports that funds for both of the commodities have at least kept pace with United States Oil (USO), if not leaving it in the dust.

In the last month, USO is up 18.6%. Year-to-date, it's up 25.6%. Not too shabby.

United States Natural Gas (UNG) is blowing right past oil, though: it's up 20% in the last month, and 45.2% year-to-date. Market Vectors Steel (SLX) is keeping up: it's up 17.9% in the last month and 17.6% year-to-date.

The question on everyone's minds is whether the U.S. slowdown will eventually catch up to the global markets and put the brakes on demand for these commodities. Gordon says it's possible for some commodities, but he doesn't see steel demand slowing. In China, the number of steel factories has doubled in the last five years.

Global demand for natural gas is also high, but the supplies are plentiful. That begs the question: why has the price been rising? It all traces back to the price of crude oil; it's so expensive that natural gas is one of the alternatives under consideration. It's the cleanest burning carbon-based fuel (unlike coal), and cars powered by natural gas are getting attention from major car makers such as Honda.

Do you find it daunting to focus on a single commodity? Another option is picking a fund diversified over several commodities, such as the Dow Jones Total Commodity Index ETN (DJP) or the iShares S&P GSCI Commodity-Indexed Trust (GSG), which is allocated about 67% in energy, 16% in agriculture, 7% in industrial metals, 7% in livestock, and 3% in precious metals.

Government Tax Cuts on Stocks Make China ETFs Soar

China's exchange traded funds (ETFs) are making a big rally today after the government lowered taxes on stock transactions.

The share-trading stamp tax was cut by the government from 0.1% from 0.3%, reports John Spence for Market Watch. The move is viewed as an effort to give the Chinese stock market a shot in the arm. After the cut was made, some of the Chinese ETFs shot up by as much as 6.8% midday.

China's exchange traded funds (ETFs) have had a rocky year, but could the economy have turned a corner?

Tony Sagami for Money and Markets reports that the country's gross domestic product for 2007 rose 11.9%, ahead of the 11.4% projections. It's the fastest growth in 13 years.

China definitely has some political and social obstacles to overcome: its poor environmental and human rights records, the PR disaster of the Beijing Olympic Games and riots in Tibet. But Sagami says that when it comes to the Chinese economy, things are looking up.

Retail sales rose by 20.2% in the first two months of this year. There has also been a 33.8% increase in auto sales, and demand for luxury vehicles is expected to grow between 40%-45% this year. The trade surplus grew by $41 billion in the first quarter, as well, so China isn't hurting from any U.S. slowdown yet.

Foreign investment seems to be pouring into China, as well: in the first quarter, it increased 61.3%.

Retail sales are up, foreign investment is flowing, and the Chinese trade surplus seems to be unaffected by a U.S. economic slowdown. China is actually the second largest economy when measured by purchasing power.

Sagami suggests that buying China on the dips can be a profitable move for an investor to make. We would wait until this fund crosses above its trend line (200-day moving average) before diving in.

It's been a rough few months for these funds. Will the tax rate cut help sustain today's momentum?

• iShares FTSE/Xinhua China 25 Index (FXI), down 12.9% year-to-date
• PowerShares Golden Dragon Halter USX China (PGJ), down 20.2% year-to-date
• SPDR S&P China (GXC), down 15.5% year-to-date

Renewed Cooperation Between Singapore and Malaysia Can Help ETFs

Malaysia and Singapore have been working together to benefit their economies and, in turn, their exchange traded funds (ETFs).

Carl Delfeld for ETFfolio feels investors have finally begun to appreciate that Malaysia offers attributes that are similar to its neighbor to the south, Singapore.

Malaysia has a diversified economy: 43% of its gross domestic product (GDP) is in the service sector, while agriculture is 8%. One-third of its population is under the age of 15. Economic growth last year was 6%.

Malaysia's improvements have given the country power to improve its political and economic relationship with Singapore. In the past, the two countries have had a rocky relationship. By teaming up, though, it could be a win-win situation.

The iShares MSCI Malaysia (EWM) and the iShares MSCI Singapore (EWS) are two ways to get exposure to these countries. EWM is down 5.4% year-to-date, while EWS is up 0.3%.

Singapore's fund is most heavily allocated in the service sector, at 67.5%. Another 20.5% is in information. Malaysia's fund is split between the service (49.2%) and manufacturing (44%) sectors.

 

For full disclosure, some of Tom Lydon's clients own shares of EWS.

Silver, Base Metals ETFs Reflecting Strong Demand

Demand for silver is on the rise and it's reflected in its exchange traded fund (ETF).

Gene Arensberg for Resource Investor says the rise in demand is evident because the paper silver market isn't reflecting popular demand. The COMEX paper silver market is related to, but different, from the physical one in that it deals exclusively with very large, average 1,000-ounce "good delivery bars," and each futures contract covers the delivery of five of those bars.

The physical market is every coin and bullion shop and a range of other silver products.

The scarcity of the metal is evident now, Arensberg says, because dealers are paying higher than normal premiums, evidence of an immediate need for the metal. This means that current inventories are insufficient to meet the demand at the prevailing spot price. Some dealers are paying premiums as much as $1.85 over the spot price - costs that will be passed on to their silver-buying customers.

The iShares Silver Trust (SLV) has benefited from demand for the metal. Year-to-date, the fund is up 17.7%.

PowerShares DB Base Metals (DBB) is trading higher today, lifted by a strike against Chilean copper miner Codelco, which sent futures for the metal upward. Metals were also stronger because of the weaker dollar and May oil hitting $119.90 a barrel, reports Allen Sykora for Dow Jones Newswires. DBB is up 15.6% year-to-date.

Commodities, Natural Resources Keep Chile ETF On Fire

In these commodity-crazy times, Chile and its exchange traded fund (ETF) might be something to think about.

The iShares MSCI Chile (ECH) launched on Nov. 20, and it's been up 14.4% since then. Year-to-date, it's up 11.5%. Chile is a commodity-based country and it is a surplus country with far less moving parts than in the U.S., says Roger Nusbaum for Seeking Alpha. Chile, in particular, has copper to spare. The metal is used in every major industry and growth in emerging markets is fueling demand for it.

Another perk about the Chilean economy is that the social security is privatized, so the demand for Chilean equities is consistent. Chile's economy has an attractive position now as only 15% of its exports go to the United States, so the health of the U.S. economy isn't a significant factor.

Could Spreading Wealth Make China's ETFs Go 'Vroom'?

Could China's economy and exchange traded funds (ETFs) be faltering like some think? Perhaps not. One sign: sport utility vehicle sales are taking off.

Two of the fastest growing segments in the Chinese market, in fact, are luxury cars and SUVs, reports GM China's vice president for sales and marketing. Analysts are expecting auto sales growth between 15% and 20% this year, reports Joe Mcdonald for the Associated Press.

Demand for the behemoths of the road and luxury vehicles is expected to grow by 40%-45%. China's economic growth has topped 10% for five consecutive years, and a spike in real estate and stock prices has created some freshly minted billionaires looking to spend.

The Chinese don't have to worry about the price of gas, either: pump prices have been frozen, and they're among the world's lowest.

While wealth is spreading in China, the country needs to remain vigilant about inflation, Reuters reports. Prices for food and other products are rising, and consumer inflation is running near 12-year highs. Food prices alone rose 21.4% from January to March this year.

China's ETFs have lost much of their huge gains from 2007. A turnaround for this country is eagerly awaited.

• iShares FTSE/Xinhua China 25 Index (FXI), down 13.7% year-to-date
• PowerShares Golden Dragon Halter USX China (PGJ), down 22.1% year-to-date
• SPDR S&P China (GXC), down 16.7% year-to-date

Brazil ETF Benefits From Economics and Agriculture

As exchange traded fund (ETF) investors look across the globe for investment opportunities, its hard to not take a second look at Brazil.  The economic leadership has enabled the country to grow and attract new capital, reports Mike Paulenoff of MarketWatch.  In 200, Brazilian companies were the second-largest source of foreign direct investment among developing countries.  The ETF representing the country, iShares MSCI Brazil (EWZ), has been a top performer.  Up 75% last year, and up 8.8% this year.

According to the Economist, Brazil's economy has grown an average of 4.5% since 2004.  When compared to other fast-growing economies, such as Russia, India and China, there are some differences, which give the country an edge.  The Economist notes that the divide between the city and countryside isn't very threatening.  With a multi-party democracy and freedom of expression, social change is easier to negotiate.  Brazil doesn't have the aggressive nationalism that can be seen in the other countries.  Brazil has also faced and dealt with inflation and debt.

As agricultural products continue to rise, Brazil benefits.  They produce and export a large portion of the world's beef, orange juice, soy beans, sugarcane and coffee.

Sugar Might Sweeten Agriculture ETF Performance

Sugar is one commodity whose price remains relatively low when compared with historic highs, but it may not remain that way for long, leaving room to grow for exchange traded funds (ETFs).

Take Baltimore's famous Berger cookies, the price of which one woman recently balked at: $4.59. We can personally attest to the worth-it-ness of that price. The cookies are simple: eggs, milk, sugar, flour and cocoa for that delicious mound of chocolate frosting on the top. Really, you should try them.

The price of all those ingredients has soared in recent months - except for sugar. In "real" terms, the price of sugar has been dirt cheap since the late 1980s, reports Graham Summers for Seeking Alpha.

Blame much of it on a bad reputation: sugar rots your teeth, makes you fat and makes your kids swing from the chandeliers.

But the populations of other countries are beginning to get a sweet tooth as they start eating more like we do (heaven help them), contributing to a demand for sugar that has increased 15% since 2002. Demand is beginning to outpace production: consumption has risen 4%, production has risen 1%.

The biggest sugar consumers per capita are, in order: Brazil, Mexico and Australia, according to Daniel Workman for Suite 101.

The London Stock Exchange has a sugar ETF, ticker symbol SUGA. In the United States, there is sugar futures exposure to be had in the PowerShares DB Agriculture (DBA).

International Markets, ETFs Catching U.S. Housing Disease

The U.S. housing crisis is taking its toll on other countries, and it could hit their exchange traded funds (ETFs) if it persists for long.

Real estate prices are plummeting in the Irish countryside, the Spanish coast and even parts of Northern India, reports Mark Landler for the New York Times. Some property analysts abroad are expressing fear of a wholesale collapse. Western European once were buying investment properties in places such as Warsaw and Estonia - but no longer. In India, prices have dropped 20% in the last year.

The International Monetary Fund cut its global economic growth forecast last Wednesday, and said the downturn could carry through to 2009.

The SPDR DJ Wilshire International Real Estate (RWX) could feel the pinch if the crisis continues to spread. Year-to-date, the fund is down 7.8%. Some single-country funds may also experience some bruising:

• The New Ireland Fund (IRL), down 2.9% year-to-date
• WisdomTree India Earnings (EPI), down 13.6% since Feb. 26 inception
• PowerShares India (PIN), down 6.7% since March 5 inception
• iShares MSCI Spain (EWP), down 3.1% year-to-date

The troubles stateside aren't getting much better. J.W. Elphinstone for the Associated Press reports that home foreclosures jumped 57% in March. A rash of adjustable-rate loans are also scheduled to reset in May and June, as well, meaning yet more foreclosures are likely in the third and fourth quarters.

How will real estate ETFs react in the long run?:

• iShares Dow Jones US Real Estate (IYR), down 0.3% year-to-date
• iShares Cohen & Steers Realty Majors (ICF), up 2.8% year-to-date
• DJ Wilshire REIT (RWR), up 2.4% year-to-date

For full disclosure, some of Tom Lydon's clients own shares of EWP.

Agriculture ETFs Are Hungry For Higher Food Prices

The United States is dealing with the gnarliest food inflation seen in 17 years, and Wall Street and exchange traded fund (ETF) investors may be the only side winning out.

New data to be released tomorrow may show that it's only going to get worse. U.S. food prices rose 4% in 2007. It's not likely to get any better this year, either: 2008 prices are forecast to rise by 4.5%. Compare that to an annual rise of 2.5% over the past 15 years, says Ellen Simon of Associated Press.

Market Vectors Global Agribusiness (MOO) may be primed to capitalize as rapid growth in China and India has increased demand for meat. Exports of U.S. products, such as corn, have increased, as the weaker dollar has only made them cheaper.

Many farmers have traded corn for soybeans in an attempt to fuel ethanol tanks, a more profitable endeavor. PowerShares DB Agriculture (DBA) holds corn, wheat, sugar and soybean futures, which may come out ahead this year.

The simple rise in transportation costs, with higher energy prices are mixing with the increase in high commodity costs of wheat, corn, soybeans and milk, which are creating havoc on food prices.

Tom Lydon on ETF Tracker

Tom Lydon appeared on CNBC's "ETF Tracker" segment of Closing Bell earlier today to discuss the economies of the Middle East and Africa and potential ETF plays in that region. Video of Tom's segment appears below:

ETNs Elbowing Their Way Into Competition With ETFs

Exchange traded funds (ETFs) could have another competitor if things keep going the way they are: exchange traded notes (ETNs).

The industry was once small, but has slowly been picking up steam. The first ETNs launched in 2006, by Barclays Bank PLC of London, says David Hoffman for Investment News.

They're so attractive primarily because they give investors access to hard-to-reach markets. It also gives investors that access while they wait for an ETF equivalent. For example, India was covered by the iPath MSCI India Index ETN (INP) for a couple years before two India ETFs were launched earlier this year: the WisdomTree India Earnings (EPI) and the PowerShares India (PIN).

Of course, that doesn't mean that just because there's an ETN there will automatically be an ETF.

While they might share similar names and an acronym that differs by only one letter, ETNs aren't exactly like ETFs. They are backed by the issuer of the ETN, meaning that if the issuer goes under, the ETN does, too.

ETNs also receive slightly different tax treatment that's currently the subject of much debate.  ETNs that cover foreign currency lost their tax breaks last year, and the IRS is debating what to do with the others. Right now, they're treated as prepaid forward contracts for federal income tax purposes. This means investors don't realize income or recognize any gain until the note is sold.

Among the top performing ETNs year-to-date are:

• iPath DJ AIG Natural Gas TR Sub-Idx (GAZ), up 31.5%
• iPath DJ AIG Energy TR Sub-Idx (JJE), up 21.1%
• iPath DJ AIG Industrial Metals TR Sub-Idx (JJM), up 21%
• ELEMENTS Rogers International Commodity Metal (RJZ), up 19.8%

Telecommunications ETFs on Line One

Few sectors have taken as much of a beating as telecommunications and its related exchange traded funds (ETFs). But is a turnaround in the offing?

Some analysts seem to think so. One for Citigroup upgraded telecom to "overweight," since analysts appear to be done slashing their estimates.

Telecoms have a history of underperforming the markets, reports Dan Burrows for Smart Money. If we are, in fact, at the bottom, says one analyst, telecom could be poised to outperform.

Global telecommunications is undergoing a transformation. India is the fourth largest telecom market in Asia, after China, Japan and South Korea, reports the Centre for Telecom Policy Studies. The quality of service is improving, as well as the overall accessibility.

Telecom ETFs that might be worth a look:

• iShares Dow Jones US Telecom (IYZ), down 19.2% year-to-date
• iShares S&P Global Telecommunications (IXP), down 10.5% year-to-date
• Vanguard Telecom Services (VOX), down 17.1% year-to-date

Indexes Cover African Economies - Could ETFs Be Far Behind?

Africa could soon be a player within the exchange traded fund (ETF) market. Standard & Poor's Indexes has launched three new indexes and benchmarks spanning the continent.

HedgeWeek gives the rundown:

• S&P Pan Africa Index covers 12 African markets: Botswana, Cote d'Ivoire, Egypt, Ghana, Kenya, Mauritius, Morocco, Namibia, Nigeria, South Africa, Tunisia and Zimbabwe
• The S&P Africa Frontier Index covers eight smaller frontier markets from sub-Saharan Africa, Botswana, Côte d'Ivoire, Ghana, Kenya, Mauritius, Namibia, Nigeria and Zimbabwe.
• The S&P Africa 40 Index is designed to offer tradable exposure to 40 of the most liquid companies operating primarily in Africa. They must be domiciled there.

The S&P Africa 40 is dominated by companies from the financial, materials, telecommunications and industrials sectors, with MTN Group (South Africa), Orascom Construction (Egypt), First Quantum Minerals (Zambia) and Standard Bank Group (South Africa) among the largest constituents.

The indices aim to capture 80% of the total market capitalization of each country and provide a comprehensive benchmark for African markets. Now, when will an ETF for those indexes come along?

Exposure to Africa (and the Middle East) can currently be had through the SPDR S&P Emerging Middle East and Africa (GAF). South Africa has the most exposure in the fund, with 55.3% of assets. Morocco has 7.1%, Egypt has 5.7% and Jordan has 3.6%. There's also the iShares MSCI South Africa (EZA), down 6.1% year-to-date.

HedgeWeek reports  that Dr. Ayo Salami, Director of African Business Research, feels the future of fund investment in Africa is great. He says investors who take on Africa early will be the ones to really reap the benefits because there is so much room to grow on the continent.

Salami says Africa stands to benefit from its markets being uncorrelated with those in North America and Europe.

Copper and Other Resources Enrich Chile's ETF

With a reputation as one of the world's most economically progressive free market-focused nations in Latin America, the global commodities market could take Chile's exchange traded fund (ETF) to new levels.

The country's economy has grown from ties to international markets, and many are pondering if the U.S. slowdown will affect the country's continued growth.

Chile emerged from a recession in 2000, reports Don Dion for Seeking Alpha, and since then it's experienced hearty growth. In 2007, its economy grew 5.1%. A similar rate for 2008 is projected.

The country benefits from a rich supply of natural resources, especially copper; it produces one-third of the world's supply. In addition to that, it trades fish, wine, pulp and paper products, fruits and chemicals. Only 15% of the country's exports go to the United States. It's far more reliant on trade with Asia.

On the downside, Chile could be on the brink of an energy crisis, caused primarily by a drought and a natural gas shortage. However, two of the iShares MSCI Chile (ECH) top holdings, the National Electric Company (EOC) and Enersis (ENI), could benefit. They appear to be positioned to produce enough power to take advantage of the higher prices.

So far this year, ECH is up 11.3%.

Biofuels Responsible for Higher Food Prices and Agriculture ETFs?

Once hailed as something that could help reverse global warming, biofuels are now being blamed for much of the high cost of food and the resulting strong performance of agriculture exchange traded funds (ETFs).

World Bank President Robert Zoellick says biofuels are a "significant contributor" to the prices. That, couples with droughts, financial market speculators and increased demand have created a perfect storm, according to a report on NPR's Morning Edition.

A 4.4-lb. bag of rice in Bangladesh eats up half the daily income of a poor family, Zoellick said. In Haiti, where most people live on less than $2 a day, riots protesting the rising cost of living there are threatening the stability of the country, reports Jonathan M. Katz for the Associated Press.

Staples aren't likely to get cheaper anytime soon, either. He said that since Europe and the United States have stepped up their biofuel production, it's going to keep prices high for the next couple of years.

One of the few good points about skyrocketing food prices is that they could benefit agriculture-focused ETFs:

• PowerShares DB Agriculture (DBA): up 18.7% year-to-date
• Market Vectors Global Agribusiness (MOO): up 2.5% year-to-date
• iPath Dow Jones Agriculture (JJA): up 11.4% year-to-date