NEW YORK (
) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his
blog, anticipating which ETFs will be in play next. Among his blogs this week were the following, in which he wrote about the best China ETF this year, an ETF for 3D TV, and how eco-restrictions could boost ETFs.
The Best China ETF for 2010
Posted 01/07/2010 9:26 a.m. EST
Claymore/AlphaShares China Small Cap
was my favorite China ETF in 2009 and it delivered with a gain of 96.6%.
The next closest China ETFs were
Claymore/AlphaShares China Real Estate
, up 71.9%,
PowerShares Golden Dragon
, up 63.1%, and
SPDR S&P China ETF
, up 60.5%. The most widely held China ETF,
iShares FTSE/Xinhua China 25
, advanced only 47.3% last year.
Although a lot has changed in the past year, the longer-term trends that favor small caps remain in force, in my opinion. The Chinese economy will become more consumer and healthcare focused in future, and small-cap HAO remains the best positioned broad China ETF for this trend, in my view. In my opinion, HAO has another 25% to run in 2010.
Despite difficult credit conditions for small companies in 2009, the China small-cap ETF outperformed its state-owned enterprise-heavy (SOE) competitors, such as FXI. I think we will see a repeat in 2010, as I think credit conditions will be about the same or better for smaller businesses, with the government and banks adopting targeted measures to reach out to these underserved businesses, while the large SOEs, which received much of the 2009 lending, may see credit squeezed should monetary policy tighten. With the central bank calling for "moderate loan growth", this appears likely.
In terms of sectors, HAO remains favorably weighted, with greater exposure to the technology, consumer and healthcare sectors than its peers. These sectors are likely to underpin China's growth, in my view, as it evolves into a mature consumer economy.
In summary, I believe the longer-term development of the Chinese economy will favor technology, consumer and healthcare. HAO remains well positioned in those areas. Near-term, changing credit conditions are likely to hurt larger companies, while small companies may see an improvement. Most broad China ETFs have similar portfolios, heavy in state-owned banks and telecom, and both sectors looked poised for continued underperformance. For these reasons, it will pay to stick with HAO in 2010.
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An ETF for 3D TV
Posted 01/06/2010 1:26 AM EST
One of the exciting highlights of the international consumer electronics exhibition underway in Las Vegas is 3D TV, and the
iShares MSCI South Korea Index
is the best bet for investors looking for exposure to companies involved in this development.
The popularity of the recently released movie "Avatar" in 3D, which has grossed over a $1 billion worldwide, would suggest there is a growing market for 3D entertainment in theaters. Now companies are hoping there will be a big market for 3D in homes through 3D channels and video discs that can be watched on compatible TVs.
Among the companies expected to showcase 3D-capable TVs or video players are
. Also, ESPN, a subsidiary of
, says that it will launch its first 3D channel in June. Also, a joint venture between Sony, Discovery Communications, and
will also be releasing a 3D channel, but not until next year.
Whether the technology will take off in the home remains to be seen, but if investors want to bet on its success, companies developing 3D entertainment can be found in a few different ETFs, though they aren't large holdings. For instance, Disney accounts for 4.7% of
PowerShares Dynamic Media
and 6.4% of
Consumer Discretionary SPDR
. Sony and Panasonic make up 1.3% and 0.2%, respectively, of the assets in the
iShares MSCI Japan Index
. On the other hand, Samsung accounts for 18.1%, while LG makes up 2.1% of EWY's holdings. Additionally, Samsung's preferred shares account for 2.2% of the portfolio.
Aside from the 3D angle, I believe EWY is a great fund for 2010 for a number of reasons I have blogged about recently, such as the country's inclusion in the index
will track with its yet-to-be-released first ETF.
Oddly, Eco-Restrictions Could Boost ETFs
Posted 01/08/2010 2:33 p.m. EST
Environmental efforts aimed at protecting U.S. flora and fauna could provide a boost to ETFs designed to play certain aspects of the energy market.
Washington appears to have its sights set on slowing down the expansion of natural gas drillers, but I don't expect ETFs such as the
First Trust ISE-Revere Natural Gas Fund
to take any serious hit.
This week, Interior Secretary Ken Salazar announced that new policies would go into effect that would decrease the amount of land available for future expansion, in order to protect the environment in the West, according to
In the short term, this proposed regulation will only prove to be an annoyance for natural gas drillers. According to
, of the 44 million acres leased to firms in the West, natural gas producers are only utilizing 12 million for exploration. With plenty of space left to roam, don't expect production from firms such as
Pioneer Natural Resources
slow anytime soon.
However, looking to the long term, government intervention could actually be a boon for the industry. Restricting expansion will reduce the supply of natural gas, further aiding a lift in both prices and FCG.
With the near-term outlook for natural gas prices looking strong thanks to cold weather, expect FCG to see strength as we start 2010. Another exchange-traded product I have high hopes for is the
JPMorgan Alerian MLP Index ETN
, which tracks the performance of firms that transport and store natural gas. AMJ should continue to perform well as production levels remains high.
Mountaintop mining is under attack again, this time from a group of scientists who want the permitting process halted due to concerns over environmental and health effects.
Traditionally, mountaintop mining has
come under scrutiny from environmentalists claiming that this production method, which includes scraping off mountain surfaces to expose coal veins, is detrimental to the nation's wildlife. In this latest study cited in
, these claims were strengthened by saying that not only were these extraction techniques detrimental to the surrounding environment, but they are irreparable.
Mountaintop mining accounts for 10% of the total coal production in the United States. These operations could be drastically cut back if the federal government decides to act on the report, leading to higher overall coal prices. A rise in the commodity would be a boon for in
Market Vectors Coal ETF's
even though some holdings are involved in mountaintop mining.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion did not hold any positions in the funds mentioned.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.