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.

If Investment Remains Solid, Infrastructure ETFs Could Gather Strength

An exchange traded fund (ETF) can be a better proxy for a sector than a single stock. It takes the guesswork right out of investing.

Diversification is another element that is added when using ETFs instead of a single stock within a portfolio. An example is the GE (GE) stock that missed its numbers by a long shot late last week. While media has been a weak performer so far this year - PowerShares Dynamic Media (PBS) is down 10.4% year-to-date - and the financials are tough, there could be other reasons to own GE. The company, after all, wears many hats.

How about infrastructure?, asks Roger Nusbaum for Seeking Alpha. The infrastructure sector can cover a wide range of things, including roads, airports, utilities, information technology and other channels of communication. Breakdowns in some of these areas can lead to major disruptions in a country, as seen when China experienced a record snowfall this winter.

Globally, billion upon billions will be spent on infrastructure over the next decade or two. It is reasonable to assume that stocks in this sector will do well, wait until these funds move back above their trend lines before diving in. Countries and regions such as South Africa, Latin America and China are making infrastructure improvements a particular focus in the coming years.

Build up your portfolio's inner strength with:

• iShares S&P Global Infrastructure Index (IGF), year-to-date down 10.1%
• SPDR FTSE/Macquarie Global Infrastructure 100 (GII), year-to-date down 5.8%

With Olympics Looming, China and ETFs Are Under the Microscope

China and its exchange traded funds (ETFs) have been getting a lot of attention as it has grown over the last few years. But now, with the summer Olympics looming large, the country could be the subject of even more scrutiny.

Growth in the country is undeniable. Last year, the gross domestic product increased 11%, reports Andrew Leckey for the Chicago Tribune. The streets are clogged with late-model cars and the noise of construction is inescapable.

But aside from booming growth, China has another, less positive, reputation: it's known as one of the world's worst polluters, it has a poor human rights record and freedom of speech isn't a right enjoyed by many.

As China tries to make changes to its economy, many there fear that they're going to get dragged down the with United States. The iShares FTSE/Xinhua China 25 (FXI) is down 19.8% this year, compared to being up 53.3% last year. The Golden Dragon USX China (PGJ) is down 25.8% year-to-date; last year, it ended up 62.8%.

Many believe a turnaround is inevitable, though. One portfolio manager expects growth of 10% in 2008. China is also sinking money into improving its infrastructure, including some facilities that are environmental-related, under its five-year plan, currently in its third year.

Caterpillar Down, But Big Growth Is Predicted; Will Industrial ETFs Feel It?

Shares of Caterpillar (CAT), a major component of the DIAMONDS Trust, Series 1 (DIA), pulled back from five-month highs yesterday. Caterpillar is 4.6% of the fund.

For two months, the company had been bulldozing to new records, up 22% in that time period. The blame for the turnaround is being placed with the transportation sector, as the iShares Dow Jones Transportation Average (IYT) fell 2.2%, reports Tomi Kilgore for Thomson Financial.

Caterpillar remains interesting, because it has so far been bucking the trend of the overall U.S. economic downturn. It's predicting record sales and profits for 2008, up 5% to 10% from 2007, reports Tony Reid for the Herald-Review.

Major construction projects in the United States, coupled with growing economies overseas, will be major contributors to the company's growth. Growth in markets such as energy and mining, in particular, will call for more of Caterpillar's equipment.

Caterpillar is also a component of the Industrial Select Sector SPDR (XLI), with 3.5% of its holdings.

Latin America, Brazil ETFs Are Bucking the Trend

Most single-country exchanged traded funds (ETFs) are sitting below their 200-day moving averages. Many, particularly those in Asia, are in the double digits in their positions below their trend lines.

Two funds are above, and they're sticking out like a sore thumb: iShares MSCI Brazil (EWZ) and the iShares S&P Latin America (ILF), which are 2.8% and 2.3% above their trend lines, respectively.

How is it that when the rest of the world seems to be dogged by economic woes, Latin America is still continuing to grow and perform relatively well? It turns out, lots of reasons.

1) UK integrators are gravitating toward the region, reports Doug Woodburn for vnunet, and they're setting up shop there.

2) Domestic demand is strong, fueling economic growth, say Carla Simoes and Romina Nicaretta for Bloomberg. Brazil is forecast to create more than 1.8 million government-registered job this year after posting a record last year of 1.62 million. The surge in these types of jobs, which provide full benefits, are considered a sign of Brazil's strengthening economy.

3) Brazil's fourth-quarter growth was 6.2%, surpassing expectations. It's the biggest year-over-year gain since June 2004.

4) Latin America is gearing up for some major infrastructure action, according to Public Works. The Latin American Leadership Forum will be held in early April and will feature the top 50 infrastructure projects that have a total value of $40 billion.

Can Egypt Afford the Modern Age and Get an ETF?

As Egypt teeters on the edge of globalization and some wonder if it can be afforded, could an exchange traded fund (ETF) dedicated solely to the country be in the offing?

Egypt has the largest population in the Middle East, and Cairo in particular is growing so much that its population is spilling into the desert, according to a report on Marketplace from American Public Media.

Modern Cairo dates back 1,000 years, meaning its infrastructure is literally ancient. Diane Singerman, a co-author of "Cairo Cosmopolitan," says there has been a lot of investment in bringing things up to date. There's a ring road around the city and a metro is being built, but a lot of what's taken place is because of the tourism industry.

 

And while tourism brings in money, Cairo has a dilemma: pour more money into things that will continue to bring in those tourists, or put that money into its population, much of which is living in poverty?

One quick way Egypt could rocket into the modern age is through gold. It has a 4,000-year history of gold mining, but it has so far missed out on the recent boom, according to another report on Marketplace. The Egyptian government is drafting a new mining code that's more favorable to outside investors, and one company is building the country's first major modern gold mine.

While there is no direct exposure to Egypt via an ETF, the country is 6% of the SPDR Emerging Middle East & Africa (GAF).

Construction, Manufacturing Numbers and ETFs Head Lower

Manufacturing and construction numbers came in, giving related exchange traded funds (ETFs) a punch to the gut in intraday trading.

U.S. manufacturing activity dropped in February to its lowest point in nearly five years, reports Madlen Read for the Associated Press. Modest growth was reported in January, but the Institute for Supply Management said the index was at 48.3. A reading below 50 indicates contraction. Even though they beat Wall Street's prediction of 48.1, the numbers aren't good.

Manufacturers are struggling with the rising cost of raw materials, as well as the slipping housing market.

Related to the dip in manufacturing were construction spending figures from the Commerce Department: they plunged in January by 1.7%, the biggest amount in 14 years. Not only were residential projects scaled back, but spending on hotels, motels, highways and other state and local government projects was curtailed.

Jeannine Aversa for the Associated Press says the numbers were worse than analysts were expecting.

Some construction and housing ETFs aren't reacting to the bad news too kindly so far today:

• PowerShares Dynamic Building & Construction (PKB)
• SPDR S&P Homebuilders (XHB)
• iShares Dow Jones US Home Construction (ITB)

China's Boom And ETFs Have Only Just Begun

Despite the lackluster performance of China-focused exchange traded funds (ETFs) so far this year, the country is still primed for takeoff.

Consider this: while the rest of the world is experiencing a credit tightening, China's lending grew by 22%, the same rate as last year at this time, when China's economy grew by 12%.

Larry Edelson for Money and Markets reports that China has already undermined the United States as the world's largest consumer of gold jewelry. Meanwhile, the trade surplus is set to jump 22.2% in 2008 as the country's dependence on exports shrinks. Capital investment continues to grow even though there were six interest rate hikes last year and 11 jumps in bank reserve requirements since early 2007.

Some of the world's largest infrastructure projects are now under way in China, paving the way for industrialization. Natural resources and commodities demand will continue to be fed.

If you're considering exposure to China, have a look at:

• iShares FTSE Xinhua/China 25 Index (FXI)
• PowerShares Golden Dragon Halter USX China (PGJ)
• SPDR S&P China (GXC)

Metal and Mining ETFs Are So Bright, You Have to Wear Shades

Metal and mining exchange traded funds (ETFs) continue to get a rise from a slowing dollar here and continued power outages in South Africa.

Yesterday, the SPDR S&P Metals and Mining (XME) jumped to a record high, thanks to a broad-based rally in the commodities sector overall, reports Wangfeng Zhou for Thomson Financial.

Gold is still strong, too, and funds related to it continue to perform handsomely, thanks to the falling dollar and the commodity's appeal as a safe haven. streetTRACKS Gold Shares (GLD) is up 11.1% year-to-date. iShares COMEX Gold Trust (IAU) is up 11.2%, and Market Vectors Gold Miners (GDX) is up 8.2%.

Silver, a somewhat more volatile metal than gold and platinum, has recently experienced climbing prices, as well. Its ETFs are falling in step with the upward momentum: iShares Silver Trust (SLV) is up 18.2% year-to-date, while the PowerShares DB Silver (DBS) is up 16.8%.

Platinum, for which there is no U.S.-listed ETF, also reached new heights after investors worried that the power issues in South Africa will cause a drop in inventory. The metal hit $2,173 on Tuesday, reports Sean Brodrick for Money and Markets. The question is: is this a short-term upswing, or are people going to have to dig deep into their pockets for platinum from here on out?

As the market continues to slump and South Africa's power outages and poor infrastructure continue to interrupt mining work, these ETFs and metals could see continued performance for the foreseeable future.

If It's Clinton Or Obama, These ETFs Might Benefit

Now it's time for the flip-side: What exchange traded funds (ETFs) stand to gain from a Democrat (that will be either Barack Obama or Hillary Clinton at this point) occupying the White House?

If Obama wins, says Kevin Baker for The Street, his website calls for $150 billion over ten years to be invested in clean energy technologies. He wants advances in biofuels, plug-in hybrids and an increase in the research of solar and wind power.

Clinton also has marked clean energy as a priority. She wants to reduce greenhouse gas emissions by 80% and cut foreign oil imports, and like Obama, she wants to increase the investment in energy research and development.

With priorities like those, a fund such as the PowerShares WilderHill Clean Energy Portfolio (PBW) could almost certainly benefit. One-third of the ETF is invested in alternative-energy stocks. Market Vectors Global Alternative Energy (GEX) might benefit in a Democratic administration, as well.

Another centerpiece of both the Clinton and Obama campaigns is health care reform. Obama wants to force price cuts in the industry, but without mandating that everyone be covered. Clinton, on the other hand, wants every man, woman and child insured.

The iShares Dow Jones US Insurance Index Fund (IAK) might do well in a Clinton White House, but fare poorly in an Obama one.

If Clinton is the nominee, the Consumer Discretionary Select Sector SPDR (XLY) could be worth a look. That's because her nomination could inspire Republicans to dig deep and donate big toward political commercials. Almost a third of the fund is invested in media companies.

Another fund worth a look if Obama wins the White House is the PowerShares Dynamic Building & Construction (PKB). His plan calls for more spending on roads, bridges and schools. Since this fund is 30% allocated in engineering and construction, it could reap the rewards.

What's Behind the Activity in the Steel, Metals and Mining ETFs?

Two exchange traded funds (ETFs) posted stellar numbers this week. What's behind all the movement?

Market Vectors Steel (SLX) is up 7.2% this week and up 18.4% since Jan. 22. One possible factor in the upswing is that the world's largest steel maker, ArcelorMittal MT, said it was set to raise steel prices in the United States and Europe. ArcelorMittal MT is the fund's top holding, at 14.9%, and it produces 10% of the world's global steel output.

Steel demand is booming worldwide, reports Newstex, and nearly all steel makers are expanding their operations to accommodate the demand. Matthew Hill for Mining Weekly says that China's growth, in particular, is a strong factor in the metal's demand. In fact, Chinese steel production could double by 2012.

Other fast-growing economies throughout Latin America, Eastern Europe and Russia will place extra demand on steel, too, as they call for more cars, buildings and machines. Brazil, in particular, is a major source of demand right now.

Then there's the overall feeling in the steel industry that it will be able to weather any kind of global economic downturn, report Aoife White and Matt Moore for the Associated Press.

Another ETF with similar returns of late is the SPDR S&P Metals & Mining (XME). In the last week, it's up 5.7%, and since Jan. 22 it's up 20.1%.

On top of some holdings in steel, the fund also has several companies that deal in coal mining - a major component in the production of steel.

Put the two together, and an interesting story is revealed.

ETFs Hot in Chilly Scandinavia

Exchange traded funds (ETFs) are taking off in some far-flung places.

Pension funds in Scandinavia are among the top investors in ETFs, Deutsche Bank says. Large pension funds in the region have been seen investing medium-term asset allocations in a number of Deustche Bank, particularly in emerging markets. The popularity of incorporating ETFs into the plans is attributed to open-mindedness toward new products within pensions.

Heather Dale for Global Pensions reports that db x-trackers UK has listed in five major European markets in 2007 and launched 49 products, taking in $11.1 billion USD in assets. It has plans to launch 40 more over the next month.

Manooj Mistry, the head of db-trackers, points out that when it comes to ETFs, investors are given the ability to invest in areas such as emerging markets, commodities or infrastructure - sectors that previously weren't easily accessible.

Mexico Will Put Billions Into Infrastructure - ETF Might Say 'Ole!'

Mexico will soon start pouring money into its infrastructure, benefiting its economy and exchange traded funds (ETFs).

On Monday, Doug Krizner and Dan Grech for Marketplace report, President Felipe Calderon will make his first presidential visit to the United States. He's planning to visit Mexican communities in Los Angeles, Chicago, Boston and New York in an effort to chart a more independent course for Mexico's economy.

He's even more motivated to do that now that the United States is headed for a recession.

As we said yesterday, countries tend to pour money into improving the infrastructure when the economy gets tough. President Calderon has budgeted $25 billion to build highways, bridges and other projects to ensure that his country doesn't have to depend on the U.S. economy as much.

So far, they appear to be on the right track.

The Mexican peso is strengthening: it rose to a three-month high on Friday after investors bet that the Federal Reserve will cut its benchmark rate in March. Investors who believe the peso will continue its upward trend can hedge the falling dollar with the CurrencyShares Mexican Peso Trust (FXM).

Mexico's Central Bank cut projections for growth in 2008 by nearly a percentage point. The iShares MSCI Mexico (EWW), however, is up 9.8% year-to-date. Since Jan. 22, it's been up 7.5%. The fund is currently residing below its trend line, though. If President Calderon's plan to boost his country's infrastructure is a success, it could make this fund one to keep an eye on.

Infrastructure ETFs Could Build Up in Weak Economy

Weakness in the economy isn't the only thing dogging exchange traded funds (ETFs) as well as both developed and emerging markets: the infrastructure is hurting, too.

Scott Jagow for Marketplace reports that one only need to look around the world to see the evidence: railway disasters in China, power outages in South Africa, Internet disruptions in India and the Middle East. Not to mention the bridge collapse in Minnesota last August.

While emerging markets have been growing and building skyscrapers, factories and commercial properties, they've been neglecting their infrastructure.

Marketplace Economic Correspondent Christ Farrell says that this is actually a silver lining to all the weakness in the economy: there's going to be infrastructure investment over the next couple years, not just just in growing economies, but in the United States, as well. Our highway system was built, he says, when Elvis was still shaking his pelvis.

Farrell says it's what governments naturally do when the economy slows: they want to boost spending and get people employed. The classic way to do it is borrow some money and put it into infrastructure.

If Farrell's prediction proves true, two infrastructure ETFs could reap the rewards:

• SPDR FTSE/Macquarie Global Infrastructure 100 (GII)
• iShares S&P Global Infrastructure Index (IGF)