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Top ETFs Have a Latin America Flavor

Investors in exchange-traded funds focusing on Latin America were celebrating like it was still Carnival throughout the month of May.

Five of the top 10 ETF performers for the month were Latin American funds, and another, the Claymore/BNY BRIC ETF (EEB), is also significantly invested in the region.

The remaining ETF leaders for the month represent an eclectic mix, including the HOLDRs B2B Internet Fund (BHH), the Market Vectors Steel Index (SLX) ETF, the PowerShares Golden Dragon Halter USX China Portfolio (PGJ) and the PowerShares Dynamic Oil & Gas Services Portfolio (PXJ).

Some investor uneasiness about new investments in oil producers has led some toward tangential approaches to energy investing. The appearance of the PowerShares Dynamic Oil & Gas Services Portfolio on the leaders list would seem a confirmation of that strategy. On the other hand, that the laggards list includes the United States Oil Fund (USO) and the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) would indicate investor caution regarding crude oil investments.

The above-mentioned iPath fund represents an emerging subset of ETFs. It is one of a growing class of investments known as "ETNs" -- for "exchange-traded notes" -- that track unsecured debt securities.

Investments in OIL reflect the returns that are potentially available through unleveraged investments in West Texas Intermediate crude oil futures contracts, plus the Treasury bill rate of interest that could be earned on funds committed to the trading of the underlying contracts.

While Latin America and China populate the leaders list, Europe holds three positions on the ETF laggards list for May. Two European equity funds, the HOLDRs Europe 2001 Fund (EKH) and the SPDR S&P Emerging Europe (GUR) ETF keep company with the CurrencyShares Swedish Krona Trust (FXS) on the laggards list.

A gold fund and a quartet of health ETFs round out the May laggards. The ETF leaders and laggards in the table below omit leveraged and "inverse" funds.

May 2007 ETF Leaders & Laggards*
Name, Ticker, Ratings Grade** Objective 1-Month Total Return (%) Year-To-Date Return (%) 12-Month Return (%) 3-Year Annual Return (%)
HOLDRs TeleBras (TBH) D- Non-U.S. Equity 14.53 30.21 48.3 21.09
iShares MSCI Mexico Index Fund (EWW) A Non-U.S. Equity 13.59 22.65 76.31 49.75
HOLDRs B2B Internet (BHH) E- Growth - Domestic 12.81 6.02 -10.54 2.87
iShares MSCI Brazil Index Fund (EWZ) B+ Non-U.S. Equity 12.80 26.55 63.68 64.39
Market Vectors Steel Index ETF Fund (SLX) U Equity Income 12.11 43.13 n/a n/a
iShares S&P Latin American 40 Index Fund (ILF) A Non-U.S. Equity 11.64 23.9 63.48 57.34
SPDR S&P Emerging Latin America ETF (GML) U Emerging Market Equity 11.23 n/a n/a n/a
PowerShares Golden Dragon Halter USX China Portfolio (PGJ) A- Non-U.S. Equity 10.14 11.87 48.6 n/a
PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) C+ Energy/Natural Resources 10.10 25.6 20.74 n/a
Claymore/BNY BRIC ETF (EEB) U Equity Income 9.70 13.13 n/a n/a
HealthShares Neuroscience ETF (HHN) U Health/Biotechnology -6.43 n/a n/a n/a
HOLDRs Europe 2001 (EKH) B Non-U.S. Equity -5.70 3.12 21.04 15.17
iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) U Energy/Natural Resources -4.56 -5.96 n/a n/a
United States Oil Fund (USO) U Energy/Natural Resources -4.45 -5.12 -27.71 n/a
SPDR S&P Emerging Europe ETF (GUR) U Emerging Market Equity -3.99 n/a n/a n/a
HealthShares Emerging Cancer (HHJ) U Health/Biotechnology -3.87 n/a n/a n/a
CurrencyShares Swedish Krona Trust (FXS) U Non-U.S. -3.16 -0.08 n/a n/a
HealthShares GI/Gender Health Fund (HHU) U Health/Biotechnology -2.99 n/a n/a n/a
HealthShares Metabolic Endocrine Disorders (HHM) U Health/Biotechnology -2.64 n/a n/a n/a
PowerShares DB Gold Fund (DGL) U Precious Metals -2.61 n/a n/a n/a
* Leveraged & "inverse" funds excluded.
** "U" is unrated.
Source: Ratings, data as of 5/31/2007.

The author holds a long-term position in PowerShares Golden Dragon Halter USX China Portfolio.
Richard Widows is a financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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OIL $4.81 -1.64%
PGJ $26.86 -4.14%
PXJ $10.15 -1.55%
EWZ $20.06 -2.38%
EEB $21.41 -2.15%


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