ETF Chart of the Day: Copper Call

Beginning around mid-February of last year, the price of Copper started to dislocate away from China’s equity market as measured by the largest China focused equity tracking ETF FXI (iShares China Large Cap, Expense Ratio 0.73%, $6.1 billion in AUM), and to a large degree.

Trailing one year performance in JJC (iPath DJ-UBS Copper Total Return Sub-Index ETN, Expense Ratio 0.75%) shows a >22% loss, while FXI during the same time period has rallied nearly 20%. What is even more at odds with conventional thought to some at this juncture is that other Physical Metals such as Gold, and more importantly Silver, which is conventionally thought of as not only a Precious Metal but also an Industrial Metal like Copper, has popped notably in the short term.

This is not to say that the Chinese equity market and Copper prices are always in perfect correlation, as the trailing one year data would suggest the complete opposite and a notable lag in general in Copper prices
over a five year period to Chinese stocks.

The price pressure on Copper metal itself remains today however, and JJC is gapping down nearly 3% this morning, registering new lows on news that Copper prices have hit five year lows. JJC remains a rather small fund in notional dollar terms, with a bit less than $50 million assets under management, a number that has been dwindling with the fund losing >$28 million via outflows in the trailing one year period.

There is at least one interesting article out there covering the recent slide in Copper prices, one specifically from Reuters titled “Copper Price Slump May Not Yet Be Deep Enough To Cut Much Output” that explains the state of affairs in the Copper metal market rather well to those whom may be on the sidelines wondering what the scoop is.

CPER (United States Copper Index ETF, Expense Ratio 0.65%) is designed as an ETF as opposed to the ETN structure of JJC, and this fund remains rather small in asset size ($2.8 million) despite debuting back in late 2011. This fund of course has also been under immense price pressure like JJC.