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.

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 (MBB)
  • SPDR Lehman Aggregate Bond (LAG)
  • iShares Lehman Intermediate Credit Bond (CIU)
  • iShares Lehman Government/Credit Bond (GBF)
  • Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (SMB)
  • PowerShares Insured National Muni Bond (PZA)

Whatever you do, whether you decide to tweak your portfolio or just sit and wait, stick to your investment plan. Once investors are guided by their emotions is when the real trouble begins.

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

You Can't Always Judge an ETF By Its Name

In December, Barclays added another international exchange traded fund (ETF) to its lineup: the iShares MSCI Kokusai Index Fund (TOK).

 TOK covers 1,203 holdings in 22 developed markets, minus Japan, with the United States taking the most holdings at 50%. The second-largest constituent is the United Kingdom, at 12%. There are also holdings in Austria, Belgium, Ireland, Italy, New Zealand, Spain, Sweden and Switzerland.

The largest holding is ExxonMobil Corp. (XOM) at 2%. It's most heavily concentrated in financials, at 24.7%. When the fund launched, Matt Hougan for Index Universe wondered if it wasn't a strange product to launch on a U.S. exchange since, after all, most U.S. investors are already invested in this market and would instead want exposure to Japan in their portfolios.

But the most intriguing thing about the fund, we think, is its name: "kokusai" is the Japanese word for "international." It's an interesting choice of word for a fund with no holdings in Japan.

Spain's Economy And ETF Mirroring The US?

The Spanish economy is still healthy and full of potential, however, signs that the economic landscape is shifting have emerged, effecting related exchange traded funds (ETFs). During recent years Spain has undergone an intense economic modernization, thus expanding the economy for 11 consecutive years. iShares MSCI Spain Index (EWP) gained momentum on the country's economy, reports Don Dion for Seeking Alpha.

The signs of distress ring the same as for much of America: plummeting property values, after an intense multi-year housing boom, financial markets coping with bad debts, and rising oil and food costs are sending inflation to scary levels. Home values tripled in the last decade, forcing many Spaniards to take on a large debt. If home values drop 10% in the next year, serious economic woes face homeowners and developers.

EWP may have difficulty gaining much ground in the new year, but if investors remain optimistic, this ETF could keep its momentum, maybe even inch its way up higher. EWP is up 17.7% year-to-date.

Single-Country ETFs...And The Winner Is....

Single-country exchange traded funds (ETFs) can be a good investment for portfolios, however, picking which country is a hard decision. There are many factors to consider like reward-to-risk, performance comparison, pullbacks and time frames, as well as local politics and economics. Matthew D. McCall for Seeking Alpha analyzed 25 single-country ETFs and came up with four that were worthy of the reward-to-risk setup. The winners are, in order of reward-to-risk opportunity:

1. iShares MSCI Spain (EWP) gained 48% in 2006 compared to 13.6% for the S&P; up 22.8% year-to-date, while the S&P 500 is down 0.8%%.
2. iShares MSCI Germany (EWG) gained 32% in 2006, and is up 26.9% year-to-date.
3. iPath MSCI India ETN (INP) year-to-date up 65.4%, and only began trading in December 2006.
4. iShares MSCI Malaysia (EWM) returned 33% in 2006, and is up 32.3% so far this year.

ETFs Try Their Cut At Timber

The latest from Claymore's exchange traded fund (ETF) family is the Claymore/Clear Global Timber (CUT), which tracks the Clear Global Timber Index. This includes 27 companies that produce wood and paper products. Companies are based in 11 countries and the index weights the U.S. at 26.4%, Canada at 12.3%, Japan at 11.5% and both Finland and Brazil at 9% each, reports Trang Ho for Investor's Business Daily.

Each stock accounts for 1-5% of assets. The top three holdings are Votorantim Celulose e Papel (VCP) of Brazil, Grupo Empresarial of Spain, and MeadWestvaco (MWV) of Virginia. Timber is a hard-asset class that has slipped under investors' radar until now. Its low correlation to other asset classes represents an opportunity to give a necessary allocation option.

Spain ETF - Being a Gallant Instead Of a Goofus Could Pay Off

How can better manners be an asset to the Spain-focused exchange traded fund (ETF)? Spain is seeking to end a dispute with Venezuela that began when Venezuela's president Hugo Chavez repeatedly interrupted Spanish King Juan Carlos, who in turn told Chavez to "shut up." This occurred at a summit meeting in Chile last week. Later in the week, Chavez said he didn't want to damage relations with Spain, but was thinking deeply about his country's relations with the country.

In clarification, the Associated Press reports that all Spanish companies are going to be held more accountable and will be under scrutiny while they are in Venezuela. Most of the Latin American countries that attended the summit had support for Spain. While the dispute seems to be contained in Venezuela, iShares MSCI Spain Index (EWP) isn't likely to feel immediate effects of this tiff.  It is up 25.2% year-to-date.

All Is Sunny for Spain's ETF...for Now

When the markets were down last week, Spain's exchange traded fund (ETF) iShares MSCI Spain Index (EWP) was the only country specific ETF with positive returns. Currently, EWP is up 19.4% year-to-date.

According to Prime Minister Jose Luis Zapatero, the solvency of Spain's financial institutions and the strength of its economy are defending the country from the recent market turbulence that has been seen in other European Union (EU) member states. Spain's equities markets have been hitting record highs over the last few days, reports Jonathan Gleave for Thomson Financial News. The prime minister said that EU leaders all agreed on the need to deepen the strength of financial markets and to defend them from further turbulence.

However, the real-estate slowdown that hit the U.S. seems to be spreading to Spain. Reasons behind the lag include higher interest rates, faltering confidence and tighter lending standards similar to what is occurring in the U.S, reports Joellen Perry and Keith Johnson for The Wall Street Journal. Some have said their higher payments on mortgages are cutting into their ability to spend. In addition, a recent report from the Standard & Poor's says that Spain is set for a slump in its property market. Spain's 10-year construction boom seems to have ended as housing sales were 11% lower in the second quarter this year than in the first three months. If the housing sector in Spain continues to slow, how will this affect the ETF?

Spain and Its ETF Rides the Bull

Exchange traded fund (ETF) investors might be shocked if there were to go abroad to Madrid and see what a business hub it is becoming. In the center of the city are four large office buildings being constructed. The structures will comprise the Four Towers enterprise park, and the first building is scheduled to be completed by the end of the year. These new office buildings are a potent symbol of the vitality and expansion of Spain’s commercial and political capital, as well as an example of the importance of construction to the country’s economy, reports Chris Johnston for The Times. The creation of the new business center could be one factor behind Spain's iShares MSCI Spain Index (EWP) ETF rising performance. Currently, EWP is up 13.3% year-to-date.

The Spanish economy boomed from 1986 to 1990, averaging 5% annual growth. After a European-wide recession in the early 1990s, the Spanish economy resumed moderate growth starting in 1994. Spain's mixed capitalist economy supports a gross domestic product (GDP) that, on a per capita basis, is 80% that of the four leading West European economies. Some of its leading industries include food and beverages, metals and metal manufactures, chemicals, shipbuilding, automobiles, according to the CIA World Factbook.

An ETF Spanish Style

As the market rides the waves, a few exchange traded funds (ETFs) stand out against the rest. One such ETF is the iShares MSCI Spain Index (EWP). It's up 13.6% year-to-date and is above its trend line. One of the reasons for EWP's success comes from its neighbors' prosperity. Also, according to the Bank of Spain, the country's GDP grew 4% in the second quarter. Some of the factors in the second-quarter rise include a smaller trade deficit, a rapid slowdown in the growth of housing prices and a 5% increase in construction investments, the Associated Press reports. In addition, tax revenue appears to be growing above expectations despite tax cuts this year, which is likely to create a 2007 budget surplus that is higher than expected.

Around the ETF World

As the international exchange traded fund (ETF) market expands, it's becoming a more popular area in which to invest. Asian country-based ETFs have been doing especially well because of strong labor markets. China's economy has been growing so fast and performing so well that it's had to tighten credit six times this year.

Europe has had some strong performers as well, namely Germany and Spain. Increased spending and falling unemployment has helped Germany's ETF do well. Spain's success can be partially attributed to Europe's economic prosperity. Carl Delfeld for ETF XRAY also commented on the global markets. Below are the ETFs and their performances year-to-date.

• iShares MSCI South Korea Index (EWY) - up 25.5%
• iShares FTSE/Xinhua China 25 Index (FXI) - up 16.9%
• PowerShares Golden Dragon Halter USX China (PGJ) - up 18.8%
• SPDR S&P China (GXC) - up 14.6% for the last three months (launched in March)
• iShares MSCI Germany Index (EWG) - up 16.9%
• iShares MSCI Spain Index (EWP) - up 9.2%

European ETFs: Get One Whole or Take Them by the Slice

Investing in Europe via exchange traded funds (ETFs) is another way to diversify your portfolio. In a way, it's kind of like ordering pizza. When you invest in a European ETF that has different holdings in various countries, it's like you get a whole pizza with different toppings. Or, if you're not feeling as hungry, you can order by the slice: Invest in a specific country with its own economy. Again, there's plenty of variety, as you can see from the menu below. (Note that it is not an all-inclusive list of European ETFs.) That's the beauty of them, there's always something to satisfy your investment craving. To learn more about European ETFs, check out this article from Zoe Van Schyndel for The Motley Fool.

Spain ETF Gets a Little Help from Its Friends

Spain's exchange traded fund (ETF) is enjoying a fresh boost thanks to its European neighbors. iShares MSCI Spain (EWP) comprises 35 stocks that trade on the Madrid Stock Exchange. It has returned 10.5% for the year-to-date. Spain has experienced a consecutively growing economy for fourteen years, and EWP was one of the top-performing ETFs in 2006.

Although the holdings in EWP are Spanish-based companies, some of the larger ones have ties to other European countries, such as Telefonica (TEF) and Repsol (YPF). Joanne Von Alroth of Investor's Business Daily reports Telefonica is one of the largest telecommunications companies worldwide, and Repsol has stations in 29 countries. Of the top holdings, 36% are financials, and 17% is with Telefonica.

ETFs Rebound in First Quarter

When you think of spring, one may conjure images of flowers growing, but what about the growth of your exchange traded funds (ETFs)?  As companies are reporting first quarter earnings, Rudy Martin of TheStreet.com reviews ETFs for the first quarter. 

Although there was a bit of a scare coming from China mid-quarter, Asian markets rebounded nicely. iShares MSCI Singapore (EWS) was up 10.5% for the quarter, with a healthy economy.  iShares MSCI Malaysia (EWM) returned 19% for the first three months of 2007, as the country works toward becoming an economic hub.  iShares MSCI Australia (EWA) saw 10.4% growth with banking, real estate, metals and mining boosting the economy.

In Europe, iShares MSCI Austria (EWO) grew 5.3% as it continues to be a hub for Eastern European commerce.  iShares MSCI Spain (EWP) rose 5% on its drive for growth, with the housing/building industry booming and Spaniards forgoing siesta to work harder and longer.

Spain ETF-Don't Fight the Bull

Don't fight the bull market in Spain-instead look at the investment opportunity there may be in a Spain exchange traded fund (ETF). iShares MSCI Spain (EWP) is up 9% year to date and was one of the top ETF performers for 2006, up 48%.  EWP has holdings in finance and telecommunications, including Banco Santander Central Hispano 19% and Telefonica SA 17%.

Spain's economy has been fueled by consumer spending, easy debt, immigrant labor, and a booming building/housing industry, well above the European Union average for over a decade. There is an overall sense of optimism in the population and there are cranes on every horizon to build on this can-do mentality. Rumor has it some Spaniards are even giving up "siesta" and working harder and longer.  Tracy Wilkinson for The Los Angeles Times warns that the pillars of growth are construction, housing, banking and tourism - all of which cannot sustain forever and do little to further productivity.

Never-the-less, Spain has the fastest growing immigrant population and is the country of choice for European job seekers. The Spanish acceptance of immigrants exceeds that of any other European country.  Spain's drive for growth has led it into it's most intense and longest period of expansion since becoming a market democracy in the late 1970's.

Top Performing ETFs for 2006

Once again, global exchange traded funds (ETFs) were the top performers for 2006. 

Booming economic growth in China helped push the China ETFs to the number one and two spots for the year.  iShares FTSE/Xinhua China 25 Index (FXI) and PowerShares Golden Dragon Halter USX China (PGJ) were up 81% and 51% respectively.  Part of the growth in China is due to cargo - manufactured goods need to move throughout, in and out of the country; construction - infrastructure needs to be built; and consumers, also known as chuppies - consumption of high end goods is the current trend.

On the other side of the globe, Spain was one of the fastest growing economies in Europe, due to a wave of mergers and acquisitions, a surge in construction and a real estate boom.  All factors helped boost iShares MSCI Spain (EWP) ending the year up 48%.

Back in Asia, doing business with your neighbor certainly can be a plus, as it was for Singapore.  The country has the the world's busiest port and enjoys a healthy economy.  iShares MSCI Singapore (EWS) represents the region and was up 43% for the year.

Mexico made the top performing list last year and does so again in 2006.  iShares MSCI Mexico (EWW) was up another 43% this year.  Even with uncertain election results for part of the year, the Mexican economy boomed with abundant trade and infrastructure development.

Since China took up the top two spots we thought we would include number six, iShares MSCI Sweden (EWD), up 42%.  Sweden's economy was strong this year, even with an election this past fall.  The ETF has a bit of exposure to financial service companies, which were key performers for the year.

For full disclosure, some of Tom Lydon's clients own FXI, EWS and EWW.

Spain ETF on a Bull Run

The iShares MSCI Spain Index Fund (EWP) has been one of the top exchange traded fund (ETF) performers of 2006. Economic growth in Europe and Spain is helping the Madrid stock market and the fund. With returns close to 50% and a moderate expense ratio, this fund gives good exposure for a not-too-diverse fund.

After such high returns in 2006, Zoe Van Schyndel of the Motley Fool says don't be surprised if EWP returns are lower in 2007.  Imports have been rising in Spain, creating a larger deficit, the euro is up nearly 30% and the terrorist threat always lurks
with the Basques. Despite this, the bull may have some life left in him.

Spanish Economy Effects ETF

Spain's high economic growth is of interest to investors in the Spanish exchange traded fund (ETF). iShares MCSI Spain (EWP) is up 44% year-to-date and up 9% for the month.  Spain's stock market is booming with Madrid's Ibex 35 Index up 30% this year, and a total economic growth forecast at 3.7% this year.

A lot of this is due to a wave of merger and acquisition activity brought on in key sectors. The trend is apparent among corporate giant Telefonica, which is channeling profits from Latin America to Europe. The capitalist spirit has caught on in Spain and the largest factor responsible for the economic surge is construction, with a real estate boom that has seen home prices rise 200% in the past 8 years, reported by Joe Tarzian in BusinessWeek. Spain's building firms are also reaching out into the energy market. In order to keep Spain's stocks growing, their diversification drive will have to continue.

European ETFs Growing Performance

Exchange traded funds with an international focus have enjoyed better returns than their U.S. counterparts.  European ETFs have been performing well and reaching new highs this month.  The top country performers are iShares MSCI Spain (EWP) up 9% for the month, iShares MSCI Austria (EWO), up 8%, iShares MSCI Belgium (EWK) and iShares MSCI Sweden (EWD) with a 5% gain each.

Sam Patel reports on these ETFs in TheStreet.com and shows that each are heavy weighted in the banking sector, which has been doing well globally.  Spain and Sweden have the fastest grwoing economies.  Spain's economy is the biggest of the four countries.

Spain ETF (EWP) Boosted by Housing

iShares MSCI Spain (EWP) is one of the top performing exchange traded funds year-to-date.  This ETF is up 32%; 12% in the last three months.  Banks make up 39% of the holdings in EWP.

Murray Coleman of Investor's Business Daily reports that a housing boom in Spain is the reason for the performance.  The five year old growth in property prices in the country is beyond what the rest of Europe is experiencing.  U.K. real estate investors are the main ones pushing up the prices as they look outside of their own country where prices are much higher.