South Korea's ETF Boosted By Retail Numbers

South Korea's exchange traded fund (ETF) shot up a nice 3% in trading yesterday, possibly owing in part to expanding department store sales.

They expanded for the fourth consecutive month, reports Seyoon Kim for Bloomberg. Consumers snatched up luxury items, clothes and food, which sent sales up 6.5% from a year earlier. March sales rose 6.7%.

One of those stores, Shinsegae, is 2% of the iShares MSCI South Korea (EWY). Year-to-date it's down 10%. The consumer goods sector makes up 26% of the fund.

On the flip side is that the country's vice finance minister said the economy is in a downturn much like the rest of the world. The jobless rate rose to a five-month high in April as manufacturers, builders and retailers let workers go. This could be an indication that department store sales may cool.

Britain's biggest retailer is planning to purchase 36 discount stores from South Korea's E-Land for $1.9 billion, report Rhee So-eui and Rachel Sanderson for Reuters. This acquisition could challenge Shinsegae, which runs the top-ranked E-Mart chain.

The country is Tesco's second most profitable market after Britain, and this expansion might be seen as a sign that Tesco has faith in the strength of the South Korean economy.

Everyone Is Talking About the Dollar. Let's Talk About Currency ETFs.

Exchange traded fund (ETF) investors are fully aware of the value of the dollar these days as they snap up products that allow them to hedge its losses. But now more than ever, even the average Joe knows what the dollar is (or isn't) worth.

It's invaded pop culture: you've got Jay-Z waving euros in a video. McDonald's commercials talk about how the dollar is "dropping like a lead balloon." Model Giselle Bundchen was rumored to be asking to be paid in euros awhile back.

Since when are exchange rates the subject on the minds of so many? People are becoming increasingly aware of the fact that it's possible to spend your dollars on other forms of currency, says Rob Walker for the New York Times. Some point to the internet and the wide choices of financial news sources.

One bank has sold foreign-denominated certificates of deposit (CDs) for years, and they're more popular today than ever.

Don't count out foreign currency ETFs and exchange traded notes (ETNs) - there are more choices than ever, and more are likely to come along. Investors can hedge the falling dollar against the euro or the Japanese yen and a number of other currencies, or they can simply bet on a bullish or bearish dollar.

Among the many currency ETFs and ETNs:

• CurrencyShares Euro Trust (FXE)
• PowerShares DB US Dollar Index Bullish (UUP)
• Market Vectors Rupee/USD ETN (INR)
• WisdomTree Dreyfus Brazilian Real (BZF)

Read the disclosure, as Tom Lydon is a member of Rydex Funds.

Individual Investors Seem to Gravitate to ETFs

The stock rating system on the Motley Fool is slowly seeing exchange traded funds (ETFs) making up the top ten. And now, six of the top ten stocks are actually ETFs.

Before we proceed, CAPS is the Motley Fool's rating system where investors work together and pool all their information to help you identify which stocks are the best to buy and when, along with which stocks to avoid.

Players rate stocks and predict which will under perform or outperform all the while The Fool keeps score and rates them. In turn, players receive ratings and based on the performance of their picks. The system is updated every five minutes, so the news is all current.

Todd Wenning for The Motley Fool gives us the top six ETFs as of May 13th, and reminds us that these are not formal recommendations, just start-ups to further your own research. In respective order:

• iShares MSCI Canada Index (EWC), up 6.7% year-to-date
• iShares MSCI Taiwan Index (EWT), up 10% year-to-date
• iShares MSCI South Africa Index (EWA), up 6.7% year-to-date
• SPDR S&P Emerging Middle East & Africa (GAF), up 1.5% year-to-date
• iShares MSCI Sweden Index (EWD), up 5.5% year-to-date
• PowerShares Global Water (PIO), down 6% year-to-date

It only underscores the popularity that ETFs have acquired with individual investors.

Wenning points out that some of the individual stocks in the ETF will outperform the ETF, but that's the trouble: how do you choose which stock to go after? Hindsight is 20/20. By investing in ETFs, you remove picking and choosing from the equation.

For the month of April, we had ETF industry growth. Will it keep up?

Northern Trust Launches Three More International ETFs

Northern Trust is providing more choices for investors who want international exposure in their exchange traded fund (ETF) portfolios with the launch of three more funds.

The new funds, which cover Italy, South Africa and Singapore, are:

• S&P/MIB Index Fund (ITL): tracks the price and yield of publicly traded companies in the Italian equity markets. Stocks are traded on the Borsa Italiana and are free-float adjusted, with a market-cap weighted index.
• NETS FTSE/JSE Top 40 Index Fund (JNB): tracks the price and yield of publicly traded companies on the South African stock exchange. Focuses on the top 40 companies on the Johannesburg stock exchange.
• NETS FTSE Singapore Straits Times Index Fund (SGT): consists of 50 of the most liquid stocks, based on average daily trading volume, traded on the Singapore stock exchange.

Northern Trust began rolling out its line of international ETFs last month, and there are more yet to come, including an Ireland ETF.

Oil Futures ETFs Aren't the Only Ones Affected As the Price Moves

The retreat of oil service-focused exchange traded funds (ETFs) yesterday was a reminder for investors to not get so hung up on the price of oil that they ignore all else.

While funds such as United States Oil (USO) undoubtedly benefit from the rising prices, other funds feel the affects whether prices go up or down, too, so be sure to look around if oil pulls back and make sure the ETFs you're holding aren't getting dragged. It isn't always the most obvious ETFs that are affected - sometimes the impact can extend beyond them.

Some of the oil service-related ETFs are:

• iShares Dow Jones US Oil & Gas Exploration Index (IEO), up 19.4% year-to-date
• Oil Services HOLDRs (OIH), up 7.7% year-to-date
• SPDR S&P Oil & Gas Equipment Services (XES), up 14.4% year-to-date

Oil and gas today have hit new records, reports John Wilen for the Associated Press. Analysts are beginning to wonder if gas prices will stick to their old pattern of peaking around Memorial Day, then steadily declining as summer deepens. The cost of gas can be hedged with United States Gasoline (UGA), which is up 17.7% since its Feb. 28 inception.

The rising prices seem to be eating into demand for oil and petroleum products in the United States and Europe. Maybe that will bring prices back down from the stratosphere.

The prices have given top performances to natural gas and the energy sector for 2008, and this will only continue if there's truth in analysts' predictions that oil will rise to $200 for a barrel in the near future.

The United States Natural Gas (UNG) has risen the most year-to-date with a 42.6% return, according to Morningstar. Supply and inventory issues are pushing the ETF the right direction as many anticipate higher oil prices. UNG can also be used as a hedge for energy exposure, and tracks in percentages the movement of natural gas futures on the NYME, explains John Spence for The Wall Street Journal.

The fast growth in the oil and gas sectors has many suspecting we're in a bubble ready to burst, including Michael Kahn for Barron's. Are we? Only time will tell. The surest way to protect yourself on the downside is by having your exit strategy firmly in place if and when the downturn begins. In the meantime, don't fight the trend.

As the Dollar Ticks Up, Picking An ETF Can Be a Challenge

After months of a downhill slide, the dollar is making gains again and it's benefiting some exchange traded funds (ETFs).

It lost a little ground last week, but so far in trading today, it seems to have resumed its climb. The gains have helped calm some worries about inflation, reports Tim Paradis for the Associated Press. When the dollar is weak, it can heighten price increases. Commodities like oil then become more attractive to investors who are looking to hedge inflation.

With that, oil retreated from its record high and fell to $125.41. Last week, it gained $10.

Jack Crooks for Money and Markets points to the G7 meeting in early April as the kick-off point for the dollar's about-face. Traders began to dissect the events of the meeting and perhaps became concerned that a bottom had been hit, and now there's a battle between the dollar bulls and bears.

There are many ways to play your sentiment on the dollar and other currencies around the world. Rydex's CurrencyShares allow investors to hedge the falling dollar relative to a variety of currencies. Market Vectors has two new exchange traded notes (ETNs) that allow investors to go double long or short on the euro. And PowerShares has two ETFs that capitalize on either bullish or bearish sentiment on the dollar.

There's also an all-in-one ETF if you find it hard to pick and choose: the PowerShares DB G10 Currency Harvest (DBV). It contains exposure to the dollar, euro, yen, Canadian dollar, Swiss francs, British pound, Australian dollar, New Zealand dollar, Norwegian krone and the Swedish krona.

Among your other options:

• PowerShares DB US Dollar Index Bearish (UDN)
• PowerShares DB US Dollar Index Bullish (UUP)
• CurrencyShares Australian Dollar Trust (FXA)
• Market Vectors Indian Rupee (INR)
• CurrencyShares Swiss Franc Trust (FXF)

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Talks Between Two European Utilities Might Affect Global ETF

European utilities may be on some investors minds, as the biggest power producer in Europe gets ready to offer a takeover, lighting up related exchange traded funds (ETFs). Electricite de France S.A., the biggest power producer in Europe, is offering British Energy Group Plc a contract that will be 5% below the company's share price, report Paul Dobson and Ambereen Choudhury for Bloomberg.

The proposal is expected any day now, but it's confidential. Many power producers want to buy British Energy because Prime Minister Gordon Brown backs nuclear reactors to meet energy demand and replace the aging units. The U.K. government would sell its stake in the deal.

iShares S&P Global Utilities (JXI) holds 1.9% in Electricite de France, Iberdrola is 5.9%, with E.ON AG at 10.9%, the largest holding. The fund is allocated throughout Europe, with the United Kingdom containing 10.7% and France at 10.8%.

Oil, the Dollar and Gold ETFs Are Working Together

Slight upticks in the dollar against the euro this week may be in sync with investors timing their re-entry into the market and exchange traded funds (ETFs).

On Thursday, the U.S. dollar was up to an eight-week high against the euro in overseas trading, with the speculation of a possible slowdown in Europe that will allow the European Central Bank to cut rates, reports Peter A. Grant for GoldSeek. The dollar seems to be contained against two other major currencies, the Japanese yen and Swiss franc.

All the while gold has kept a solid stance, and oil is only heading higher lately with the newest record high reached on Friday: $126.20.

The streetTacks Gold Shares (GLD) has been turning around with positive performance in the last week, up 3.4% in that period. As long as oil continues to rise in price, it's believed that gold should continue rising along with it.

European Large-Caps On Their Way Up To Help ETFs

Although the U.S.dollar is weak, and the credit crunch has tightened the cash flow, European large-caps don't seem to be feeling this.

Exchange traded funds (ETFs) that hold European large-cap stocks include Vanguard European Stock (VGK) and the iShares S&P Europe 350 (IEV), both of which are down year-to-date, but have been ticking back up during the past four weeks.

VGK in the last month has risen 2.1%, but is down 3.1% year-to-date. IEV is up 1.7% in the last month, but down 3.4% year-to-date.

VGK is made up of bigger firms, while IEV is actually five years older. IEV holds 600 companies while VGK holds 348. The ETFs track different indexes, the MSCI Europe Index for IEV and the S&P Europe 350 Index for VGK.

Both ETFs give exposure to large, Western European companies and currencies, reports Joanne Von Alroth for Investor's Business Daily. The large-caps that make up these funds have performed well recently.

But not all is rosy in Europe: the European Union is battling 3% inflation, a credit crisis and high food prices. Some retailers have seen sales fall. But there's optimism, too, since in April both France and the United Kingdom saw their highest monthly benchmark index gains in nearly five years.

New ETF Provider Comes Bearing International Real Estate Fund

A new global real estate exchange traded fund (ETF) is in town, along with a new ETF provider.

The Cohen & Steers Global Global Realty Majors (GRI) from ALPS Advisors provides exposure to the global real estate market with 75 companies in developed markets including North America, Asia Pacific and Europe. It rebalances quarterly and has an expense ratio of 0.55%.

This fund joins a number of other international real estate ETFs, including:

• iShares S&P World Ex-US Property Index (WPS), down 4.6% year-to-date
• SPDR DJ Wilshire International Real Estate (RWX), down 1.2% year-to-date
• WisdomTree International Real Estate Fund (DRW), down 10.2% year to-date

The U.S. housing crisis has been taking its toll on the markets of other countries lately, but perhaps when this sector experiences a rebound here, it will spread overseas.

Morgan Stanley's New ETNs Go Long Or Short On The Euro

 

Morgan Stanley has joined the exchange traded note (ETN) game, with the announcement of two new notes, based on the euro. They're both now trading on the NYSE Arca.

The new notes are:

• Market Vectors Double Short Euro (DRR)
• Market Vectors Double Long  Euro (URR) 

These notes seek to provide leveraged directional market exposure to the euro and U.S. dollar exchange rate. At the same time, this is Morgan Stanley's first crack at the leveraged index world.

URR is aimed at providing two-times leveraged, long investment in the euro. For every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally
increase by 2%, while for every 1% weakening of the euro relative to the U.S.
dollar, the index will generally decrease by 2%.

DRR is designed to two-times leveraged short investment in the euro. For every 1% weakening of the euro relative to the U.S. dollar, the level of the index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the index will generally decrease by 2%.

Today, the dollar has declined against most major currencies, reports Madlen Read for the Associated Press.

Filipinos in Austria and ETF Feel Effects of Inflation

Rising inflation in Austria could help eat the way to a rise in the related exchange traded fund (ETF).

Filipino workers there are getting creative on ways to satisfy their daily dietary needs. For example, instead of eating rice, the price of which has shot up 30% lately, they're looking at potatoes and salad. The products are cheaper, but still nutrient-rich.

Consumer prices overall have inflated by 0.8% during April alone. They're up 3.5% for the year. 

Among the hardest-hit areas is that of food products, which are a basic need, reports Hector Pascua for ABS-CBN News. Rising fuel prices are to blame for the rise in food prices, similar to what we're seeing in the United States.

Is the iShares MSCI Austria Index (EWO) feeling the effects of a 7.8% rise in food prices for April, and the transportation fares rising 7.3%, all driven by the 26% increase in fuel prices? Consumer services only make up 0.96% of the ETF. Financials are 34.7% of the fund, however, and energy is 14.4%, so any increase may be reflected soon.

Year-to-date, the fund is up 1.8%. In the last month, it's up 7.9%.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
 

"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."

Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS): Represents Australia
• NETS DAX Index Fund (DAX): Tracks Germany's major exchange
• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC): Represents France
• NETS Hang Seng Index Fund (HKG): Represents Hong Kong
• NETS TOPIX Index Fund (TYI): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

ProShares Wins The Race To Market With Inverse Bond Fund

ProShares wins the race to be the first inverse bond exchange traded fund (ETF) in the world. Deutsche Bank was hot on their heels, after announcing plans a day earlier to issue a new ETF in Europe that short Eurobonds, says Murray Coleman for Index Universe.

The two new ETFs to hit American markets are:

• ProShares UltraShort Lehman 7-10 Year Treasury (PST)
• ProShares UltraShort Lehman 20+ Year Treasury (TBT)

Both ETFs are set up to measure the inverse of their daily performance of their underlying index. Remember, with a bond fund, the interest earned on cash and financial instruments figures into the overall performance results. Many investors are looking to ProShares' inverse bond ETFs to neutralize market valuations and as portfolio protection against price fluctuations.

One advantage of a fund that automatically shorts an index is that investors can only lose what they put in. By taking short positions in long ETFs, the losses can go unchecked.

To learn more about long/short ETFs, check out our interview with ProFunds' CEO Michael Sapir.

Gold Miner ETF Hits Low on Dollar's Strength

The dollar's renewed vigor is good news for most, but not for the gold miner's exchange traded fund (ETF).

Yesterday, the Market Vectors Gold Miner (GDX) hit its lowest point since Sept. 18 of last year, reports Wanfeng Zhou for Thomson Financial. Year-to-date, the fund is down 7%.

Gold is weakening, too, closing yesterday at $848.50. As the metal loses ground, so do the ETFs that hold futures: both streetTRACKS Gold Shares (GLD) and the iShares COMEX Gold Trust (IAU) year-to-date are up 2% and 1.7%, respectively. They both currently sitting at their lowest points since Dec. 31.

Lately, it doesn't seem like gold has done much of anything but go down. Even though commodities have been hit lately, and some more so than others, with ETFs it's easier to carve out those areas that are performing. Be sure to check in regularly with your funds and have your stop-loss points firmly in place if you choose to invest in commodities.

Meanwhile, the dollar hit a five-week high against the euro today and a two-month high against the yen after the government announced that fewer jobs were eliminated than expected, report Ye Xie and Bo Nielsen for Bloomberg.

One-year chart of the dollar vs. both the yen and the euro:

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.

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.

European Regulators Want to Ease Fund Rules For ETFs, Much Like The U.S.

European regulators are seeking to follow in the footsteps of their U.S. counterparts and seeking methods to ease restrictions on the ability of fund managers to invest in exchange traded funds (ETFs).

Fund managers who want to invest in ETFs are constantly restricted by rules which either stop them from outsourcing the management of the funds, or developing webs of cross-holdings, a factor in the 1929 Wall Street crash, reports Steve Johnson for Financial Times.

Here in the United States, a mutual fund is required to seek permission if it seeks to invest more than 5% of its assets in another fund or more than 10% of its assets in all other funds. The Securities and Exchange Commission (SEC) is considering granting mutual funds carte blanche to invest in ETFs, so long as certain conditions are met.

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.

Foreign Currency ETF Offerings to Pour In Next Month

Exchange traded fund (ETF) providers Dreyfus and WisdomTree are teaming up to offer five actively managed foreign currency ETFs next month.

They will include the WisdomTree Dreyfus Euro Fund, Japanese Yen Fund, Indian Rupee Fund, Chinese Yuan Fund and the Brazilian Real Fund. These will be the first of 12 to be launched under the WisdomTree Dreyfus banner. Two others include two U.S. current income funds, reports Mariana Lemann for Ignites.

Later this year, more funds will launch and cover the Australian dollar, British Pound sterling, Canadian dollar, New Zealand dollar, South African rand and South Korean won. Several of these funds will be a first in currency ETFs.

When they launch, they'll join a growing lineup of both currency ETFs and exchange traded notes (ETNs), including:

• CurrencyShares Euro Trust (FXE)
• CurrencyShares Japanese Yen Trust (FXY)
• Market Vectors Indian Rupee (INR)
• Market Vectors Chinese Renminbi (CNY)
• PowerShares DB G10 Currency Harvest (DBV)

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

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.

London Calling To Be The Biggest ETF Market

London is calling for the reign of the exchange traded fund (ETF) industry, but the struggle will be long and uphill, say analysts.

The London Stock Exchange (LSE) is aiming at becoming the number one ETF market, but they've got some formidable challengers, including the United States and other European rivals.

The total value of the ETFs traded  on the LSE last year was $20.8 billion, an 82% increase from 2006. Tara Loader Wilkenson for Financial News reports that the London exchange gained ground after the U.K. government did away with a stamp duty levied on non-resident ETFs at the end of 2006, which had deterred the funds from listing before.

As the popularity of ETFs grows, they'll begin appearing on more and more exchanges the world over. The Middle East wants ETFs, Japan has made it easier to list them and the Tokyo Stock Exchange says it wants to quintuple its ETF listings before the end of next year.

As for the United States, at the end of last month, there were 703 exchange traded products available, with a whole lot more in the pipeline.

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.

Just In Time for Warm Weather, Claymore Launches Solar ETF

While there are several clean energy exchange traded funds (ETFs) out there, none of them have focused solely on one aspect of the sector until now.

Claymore this morning launched the Claymore/MAC Global Solar Energy Index (TAN) on the NYSE Arca. Claymore President Christian Magoon told us the potential for growth in the solar industry is huge. Currently, it accounts for less than 1% of global electricity.

Will Italian Elections Deliver Some Amore to Its ETF?

Upcoming elections are leaving the fate of economic reforms that could affect its exchange traded funds (ETFs) hanging in the balance.

The crop of candidates aren't exactly setting Italians' hearts on fire: A lackluster ballot with an aging political establishment on both the right and the left are prompting many natives to give up their vote. Voter turnout has historically been high in the country.

Sylvia Poggioli for NPR reports that the Italian economy is going through a crisis, with growth at zero and one in seven families unable to live off their yearly income.

Even more frightening, Italian workers are the lowest paid in Europe. But the politicians have the highest salaries in Europe. Polls are showing that only a small percentage of Italians trust their politicians.

Former Prime Minister Silvio Berlusconi is running on the right. He comes attached with a pacemaker and facelifts, along with 5 years in office that did not deliver. He has also faced about a dozen corruption trials.

Walter Veltroni is running for the center-left, targeting the local mafias that keep local economies frozen. He wants a more efficient state, with more incentives for venture capitalists and a renewed desire to take chances.

Veltroni's leadership may be a ray of hope for the iShares MSCI Italy Index (EWI), which is down 7.1% year-to-date.

If there's a tie, both sides might have to join forces to pass the badly needed reforms.

Switzerland and ETF Could Be On the Mend, But More Woes Predicted

Switzerland recently got socked by the global credit crunch, but the country and its exchange traded fund (ETF) seem to be in recovery mode.

The Swiss bank UBS (UBS) had write-downs in the billions last week. Around the same time, mutual funds investing in the country began experiencing inflows. Year-to-date, those funds have reported $2.4 billion in inflows, the bulk of which took place last week, reports Trang Ho for Investor's Business Daily.

It's a turnaround from last year, when those funds experienced $280 million in outflows.

iShares MSCI Switzerland (EWL) has gained 1% during the past year. Year-to-date, it's down 0.6%, but in the last month, it's moved up 2.9%.

One economist predicts more reports of losses and more financial turmoil through the end of the second quarter.

The financial sector accounts for 15% of the Swiss gross domestic product (GDP), and it could make or break the overall economy. The financial sector in the ETF is the third heaviest weighting at 22.6%. The top two are healthcare (30.4%) and consumer goods (25.5%).

UBS is the third-largest holding in the fund, as well, with 5.6% of the assets. The other two holdings have a bigger share of the assets: Nestle has 18.3% and Roche Holding has 14.1%.

Who's Big In The European ETF Circle?

The European exchange traded fund (ETF) market is just as hot as its U.S. counterpart. The European market is capitalizing on the rapid growth of the industry, as major providers have adopted some very different strategies in their efforts. Paul Amery for Index Universe gives a rundown of the top ten European providers.

BGI/iShares: 137 ETFs, $57.65 billion assets under management, 43.3 of the market share; the major area iShares is missing is in the leveraged/inverse ETF arena.

Lyxor: 87 ETFs, $31.48bn AUM, 23.6% market share; Possibly too equity dependent.

db xtrackers: 49 ETFs, $10.66bn AUM, 8% market share.

AXA/BNP: 30 ETFs, $6.69bn AUM, 5% market share.

Credit Suisse: 8 ETFs, $4.97 bn AUM, 3.7% market share.

Credit Agricole: 3 ETFs, $3.02bn AUM, 2.3% market share.

XACT Fonder: 9 ETFs, $2.51bn AUM, 1.9% market share.

ETF Securities: 55 ETFs, $5bn AUM, 1.8% market share.

State Street Global Advisors: 13 ETFs, $2.35bn AUM, 1.8% market share.

UBS: 9 ETFs, $2.14bn AUM, 1.7% market share.

Sweden Has More Than Ikea - It Has Lessons for Financial Sector and ETFs, Too

The financial meltdown in the United States has wreaked havoc on the markets and exchange traded funds (ETFs). At times, it might have seemed that there would be no end to this, but all anyone has to do is look at Sweden to see how a country can emerge from a collapse of its financial system.

It all sounds so familiar: deregulation in the credit markets in 1985 led to a lending boom. Interest rates were low, supervision was lax and lenders were inexperienced. Real estate skyrocketed. Then in the early 1990s, the bubble burst: property values plunged, unemployment quadrupled in three years.

Although it's too late to avoid the kind of bust Sweden experienced, it's not too late for the United States to take a lesson or two from its recovery. Joellen Perry for the Wall Street Journal says Sweden took radical steps to turn things around.

Politicians were united and ensured that a major financial freeze did not occur. Sweden guaranteed its entire banking system of 114 banks from losses, imposed strict credit terms and forced banks getting injections to surrender shares to the government.

The United States isn't in as much danger as Sweden had been, and can still take steps to avoid a protracted downturn. But our government already appears to be applying the lessons of the crisis, evidenced in the government-backed sale of Bear Stearns. An economist says it's exactly how Sweden handled things.

Sweden's economy these days is seen as solid, and the central bank raised its key rate to 4.25% to fight inflation. The country has also managed to dodge the subprime crisis. Year-to-date, iShares MSCI Sweden (EWD) is up 1.9%. In the last month, it has risen 11.8%.

The fund has 23.2% of its assets allocated in the financial sector, the second-largest weighting. The top sector in the fund is industrial materials, which is 35.1% of assets.

Irish And Malaysian ETFs Feel Political Pressure

One of the biggest risks associated with overseas or emerging markets exchange traded fund (ETF) investing has to do with political upheavals that affect the country's economy. A good example is the recent news that will have an impact upon the iShares MSCI Ireland (IRL) and the iShares MSCI Malaysia (EWM).

Irish prime minister Bertie Ahern announced his resignation yesterday amid ongoing questioning about cash donations made to him when he was finance minister in the 1990s. Carl Delfeld for ETF Folio says Ahern will step down from his position to be succeeded by Mary McAleese on May 6th, just prior to the Irish referendum concerning the European Union reform treaty.

Ahern was a key factor in Ireland's economic boom, so the country will be watched closely as it makes its transition to a new leader.

Year-to-date, the fund is down 1.1%.

In Malaysia, the Prime Minister Abdullah Badawi has a weakening office, as members of his cabinet have stepped down, while supporting an open contest for key leadership posts. His UMNO Party is facing hard challenges from opposing parties. Leading companies, such as Telekom Malaysia, have had to be restructured. Routes have been cut from Malaysian Airlines and extra staff have been cut.

Abdullah, like Ireland's Ahern, has had a hand in Malaysia's boom. Capital controls and corruption have come down, and capital structures and costs operate more transparently and efficiently.

Malaysia's fund, after having a strong start earlier this year, is down 8.4% year-to-date.

The European ETF Market Compared To The U.S.

While most of our coverage centers on exchange traded funds (ETFs) listed in the United States, we realize that they aren't just a U.S. phenomenon. We might have the largest market for them, but Europe, Asia and Latin America all boast fast-growing ETF industries of their own.

At the end of 2007, the European ETF market had amassed assets of $128.4 billion in 423 funds, reports Paul Amery for Index Universe.

iShares is the leading ETF provider in both here and in Europe, while State Street Global Advisors is the second-largest provider in the United States. The lack of similarity of product providers within the two markets is interesting, but as time goes on there will be more overlaps.

As for asset class, fixed income has almost three times the amount in fixed income that Americans do, thanks to Europeans' historical preference for bonds. Both markets have a  strong domestic bias, but the European equity sector is less interested in overseas investing than the United States is.

More than half of the ETFs in the United States are held by retail investors; in Europe, it's closer to one-third, but data backing up this figure isn't easy to find.

Europe has special challenges, thanks to differences between the countries. Most of them might be using the same currency, but their cultures and legal systems are not the same. It's also typical to have ETFs cross-listed between exchanges, since each country generally has its own. Often, you'll see primary listings, then secondary ones.

In a country-by-country breakdown, Germany has the largest number of primary listings: 157. It's followed by France (119), United Kingdom (84), Switzerland (21) and Italy (6).

Vanguard Wants to Put Its Arms Around the World With New ETF

On the heels of iShares' new all-world exchange traded fund (ETF), Vanguard is trying to enter the fray with its own similar kind of fund.

They've registered with the Securities and Exchange Commission (SEC) for the Vanguard Global Stock Index Fund, which would offer three share classes: investor shares, institutional shares and ETF shares. It's anticipated to launch in the second quarter of 2008.

The fund aims to track the FTSE All-World Index, a market-cap weighted index of large- and mid-cap global stocks in 48 countries. About 55% of the index will be made up of stocks outside the United States.

Vanguard's new fund will join the iShares MSCI ACWI Index Fund (ACWI) as the first two true all-world ETFs. The country breakdown for the iShares fund has the as its top five countries the United States, 41.8%; the United Kingdom, 9.6%; Japan, 8.6%; France, 4.7%; Germany, 4.1%.

Across the sectors, it's most heavily weighted in financials at 22.5%. Energy is 11.7% and Industrials are 11.2%. Exxon Mobil (XOM) is the largest constituent, representing 1.6% of the holdings. General Electric (GE) is 1.2%.

It'll be interesting to compare the two funds side-by-side once Vanguard's is up and running.

Germany, Austria ETFs Could Get a Lift From Stock Ownership Plans

In Europe, could more stocks given to the workers help compensate for wages that have stagnated in much of Europe, boosting exchange traded funds (ETFs) and the stock market in general?

Voestalpine, a metal working company in Austria that makes up 4.8% of iShares MSCI Austria (EWO), has set the example, as factory visits have turned into financial briefings, and employees have now become shareholders.

Many Europeans lack faith in free markets such as those in the United States or Great Britain, and they do not rely on them to address the problems with of capitalism with more free market solutions, explains Carter Dougherty for The New York Times.

More stock in the hands of the workers could help compensate for wages that have stalled in much of Europe, even as the stock markets rally. In Ireland, the United States and the United Kingdom, the ratio of employee shareholders is 20-30%, compared to 6-7% in both Austria and Germany. German and Austrian labor contracts are more focused on wages.

In Germany, unions have been resisting the idea of employee stock ownership - they don't like  that wage increases would be substituted with stocks. German unions have instead favored profit-sharing. Automaker Volkswagen, which is 3.2% of iShares MSCI Germany (EWG), gave its employees a bonus of 3,700 euros that was linked to its operating earnings. To make stock ownership catch on, Germany's two main political parties are considering tax incentives.

Big Banks Announce Write-Downs, But Financial ETFs Turn the Other Cheek

Swiss bank UBS (UBS) revealed big damage from exposure to the U.S. subprime crisis, but financial exchange traded funds (ETFs) don't appear to be bearing the scars.

The company said today that it expects write-downs of about $19 billion, reports Onna Coray for the Associated Press. That brings its total number of write-downs to $40 billion in the last nine months, the largest of any bank to this point. UBS Chairman Marcel Ospel stepped down.

Germany's largest bank, Deutsche Bank AG (DB), announced a write-down of $4 billion.

Oddly, though, financial ETFs are soaring today. After UBS and Deutsche Bank announced their write-downs, the European banking sector shot up 3%. UBS shares soared more than 6%, and Deutsche Bank shot up more than 3%, reports CNBC. The iShares S&P Global Financials (IXG) is up more than 4.5% today. It holds 1.2% of UBS and 1.1% of Deutsche Bank.

iShares MSCI Switzerland (EWL) and iShares MSCI Germany (EWG) are up about 1.5% so far today. UBS is 5.6% of Switzerland's fund, while Deutsche Bank is 4.9% of Germany's.

The financial sector has been given a bit of a revival from U.S. Treasury Secretary Henry Paulson's proposal for an overhaul of the financial system.

This has got some wondering if the light has appeared at the end of the tunnel. Some are skeptical and feel that the temptation to go bargain hunting should be avoided until next year.

We agree - wait until the sector has steadied some and heads back above its 200-day moving average.

Playing the Waiting Game With ETFs

  Some believe we're in a full-blown recession, but no matter what they believe, exchange traded fund (ETF) investors shouldn't panic.

Chris Fichera for Consumer Reports suggests staying put and weathering the storm, while making some tweaks to your portfolio:

• While he does suggest that large-caps are attractive and relatively expensive, it's actually the small- and mid-caps that have been outperforming in the last two weeks. Large-caps are up about 1.7%, mid-caps are up about 2.9% and small-caps are up about 5%. There are a variety of small- and mid-cap funds out there, among them:
  • iShares Russell 2000 Growth Index (IWO)
  • iShares Russell 2000 Value Index (IWN)
  • Vanguard Small Cap Value (VBR)
  • iShares S&P MidCap 400 Value Index (IJJ)
  • PowerShares DWA Technical Leaders (PDP)

• International is still attractive. Europe and Japan are slowing down, but there are still emerging markets out there that are growing rapidly, with still more room to grow. Emerging markets can be volatile, so having an exit strategy here is paramount.
  • iShares MSCI Spain (EWP), up 10.3% since March 10
  • iShares MSCI Malaysia (EWM), up 10.5% since March 10
  • iShares MSCI Mexico (EWW), up 8.3% since March 10

• Go with short- or intermediate-term bonds, as long-term bonds don't have the most attractive yields right now. They would also feel the effects if the Federal Reserve were to cut interest rates further.
  
  • SPDR Lehman Short Term Municipal Bond (SHM)
  • iShares Lehman MBS Bond (